Title

Presentation

The Timken Company beats earnings expectations. Reported EPS is $1.67, expectations were $1.5.

Operator: Good morning. My name is Kara, and I will be your conference operator today. At this time, I would like to welcome everyone to The Timken Company’s first quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press star then number one on your telephone keypad again. Thank you. Mr. Frohnapple, you may begin your conference.

Neil Andrew Frohnapple: Thank you, operator, and welcome, everyone, to our first quarter 2026 earnings conference call. This is Neil Andrew Frohnapple, Vice President of Investor Relations for The Timken 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 Boldea, and Michael Discenza, our Chief Financial Officer. We will have opening comments this morning from both Lucian and Michael, 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 SEC which are available on thetimkencompany.com. 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.

Finally, just a reminder, we are hosting an Investor Day on Wednesday, May 20, in New York City. We hope that you will join us either virtually or in person. With that, I would like to thank you for your interest in The Timken Company. I will now turn the call over to Lucian.

Lucian Boldea: Thanks, Neil, and good morning, everyone. We appreciate your interest in The Timken Company and for joining us today. I would like to start by thanking our Timken team for their hard work to deliver an excellent start to 2026. We are gaining momentum and making great progress executing our strategic priorities, including two recent actions to advance our 80/20 portfolio work. Our financial performance is strong, and we are pleased to have achieved double-digit earnings growth and margin expansion in the first quarter. Turning to our results for the quarter, total sales were up 8% from last year, and organic revenue grew more than 4% driven by higher pricing and volume growth in the Industrial Motion segment. We expanded EBITDA margins to 18.8% in the quarter, and adjusted earnings per share increased nearly 20% year over year to $1.67.

With respect to capital allocation, we repurchased approximately 280 thousand shares and acquired Bijur Delimon, which I will talk about more in a moment. We ended the quarter with a strong balance sheet and net leverage of only 2.1 times, giving us continued flexibility to pursue our balanced approach to capital allocation. While Michael will take you through the details of our 2026 outlook, we are raising our guidance for organic revenue, margins, and earnings. Our outlook now implies 13% adjusted EPS growth at the midpoint of our range compared to the 8% we previously guided, and includes a more positive price/cost impact related to tariffs. We saw improved customer demand across most end markets, which was reflected in our recent order activity.

Our backlog at the end of the quarter was up both sequentially and year on year, continuing the positive momentum we experienced in the back half of last year. These trends support the increase in our organic sales outlook for the year to 3% growth. Despite continued volatility around trade and geopolitics, our team is operating with urgency to execute our strategic priorities and deliver stronger performance in 2026. As I mentioned earlier, we are deeply engaged in advancing our 80/20 strategic initiative, including optimizing our portfolio as we are prioritizing actions that will have the greatest impact to company margins and growth. Last quarter, we announced that we are extending the 80/20 discipline across our entire enterprise to reduce complexity and streamline operations.

While still early in the process, we are moving quickly. We have established a transformation office with dedicated 80/20 teams responsible for leading the execution of major workstreams. We have completed comprehensive training across many areas of the business and as of today, nearly 300 Timken leaders are fully trained and putting 80/20 principles into action. Our focus on these initiatives has driven two recent actions. On May 1, we announced the sale of our Belts business to Gates. This divestiture is expected to simplify our portfolio, free up resources to redeploy to our growth initiatives, and structurally improve margins for the Industrial Motion segment. We expect to complete that transaction in the third quarter. Secondly, we acquired Bijur Delimon, which strengthens The Timken Company’s Industrial Motion portfolio in key markets and is expected to be accretive to Industrial Motion segment margins after synergies.

The Timken Company is the natural owner of this business, and it scales our automated lubrication systems platform to nearly $400 million in total revenue. These two portfolio moves are aligned with 80/20, and the net result is a higher-margin, faster-growing Industrial Motion segment. Our teams around the world are energized by the power of 80/20, and we are confident it will be a major driver of value creation over time. I remain confident about the opportunity to raise The Timken Company’s organic growth trajectory by focusing on the fastest-growing verticals and regions. This includes driving synergies through the global expansion of our acquired businesses, and we are gaining traction. For example, we saw double-digit organic growth during the first quarter in our linear motion platform in The Americas, driven by new business wins within factory automation.

We are excited about the many opportunities like this ahead to leverage The Timken Company’s strength and create new ways to drive higher performance. Before I turn over the call to Michael, I want to touch on the leadership transition we initiated for our Engineered Bearings segment and thank Andreas Trugan for his many years of service to The Timken Company. An external search is underway for a permanent successor. During this time, Tim Graham, our President of Industrial Motion, will serve as interim President of Engineered Bearings. Tim spent decades leading teams within Engineered Bearings, including most recently as Vice President of Operations. His deep knowledge of our operations and customers across Engineered Bearings will ensure a seamless transition.

Our bearings business set the foundation for The Timken Company more than 125 years ago and remains critical to our future. Together with Industrial Motion, we have a very compelling customer value proposition. I am focused on building the right leadership structure to best position our teams around the world for even greater success. With that, let me turn the call over to Michael for a more detailed review of the results and outlook. Michael?

Michael Discenza: Thanks, Lucian, and good morning, everyone. For the financial review, I am going to start on slide 8 of the materials with a summary of our strong first quarter results. Overall, total revenue for the quarter was $1.23 billion, which was up 8% from last year. Adjusted EBITDA margins increased to 18.8%, and adjusted earnings per share for the quarter was $1.67, up significantly versus last year. Turning to slide 9, let us take a closer look at our first quarter sales. Organically, sales were up 4.3% from last year. The increase was driven by higher pricing across both segments and higher demand in the Industrial Motion segment, while volumes were relatively flat in Engineered Bearings. Looking at the rest of the revenue walk, foreign currency translation contributed 3.4% growth to the top line.

The acquisition of Bijur Delimon, which closed in mid-March, added a small amount of sales to the quarter. On the right, you can see first quarter performance in terms of organic growth by region. In The Americas, our largest region, we were up 6% driven by growth across both segments in North America, while Latin America was relatively flat. In EMEA, we were up 5% from last year, driven by solid growth across both segments. And finally, we were down 1% in Asia Pacific, as growth in India was slightly more than offset by lower demand in China. Turning to slide 10, adjusted EBITDA was $231 million, or 18.8% of sales in the first quarter, compared to 18.2% of sales last year. Organically, incremental margins were approximately 35%, so solid operating performance from the team 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 $32 million and added nearly 3% to the top line as we continued to put through pricing actions to recover the margin impact from tariffs. As you can see on the slide, tariffs were a $20 million headwind versus last year. Looking at material and logistics, costs were lower versus last year driven mostly by savings tactics in the Engineered Bearings segment and material cost deflation in Asia Pacific.

With respect to the manufacturing cost line, the increase from last year reflects labor and other cost inflation, as well as a timing impact related to inventory accounting. Moving to the SG&A and other line, expenses were up from last year driven by higher incentive comp and spending on strategic initiatives. Now let us move to our business segment results. Starting with Engineered Bearings on slide 11, Engineered Bearings sales were $806 million in the quarter, up 6% from last year. Organic sales were up 3% driven by higher pricing, while currency translation added another 3%. Among market sectors, aerospace and heavy industries achieved the strongest gains versus last year. We also posted growth in general industrial, off-highway, and renewable energy.

Revenue was relatively flat across the distribution and on-highway sectors, while rail shipments were down from last year. Engineered Bearings adjusted EBITDA was $159 million, or 19.7% of sales in the first quarter, compared to 20.9% of sales last year. Margins in the quarter were negatively impacted by higher operating costs compared to last year. Now let’s turn to Industrial Motion on slide 12. Industrial Motion sales were $425 million in the quarter, an all-time quarterly record for the segment and up 12% from last year. Organically, sales increased 7% driven by higher demand across most sectors and higher pricing. Currency translation was a benefit of 4.2%, while the Bijur Delimon acquisition added 0.8%. The segment saw growth in the quarter across all product platforms and was led by double-digit gains in The Americas.

Among market sectors, automation, distribution, and heavy industries achieved the strongest gains versus the prior year. We also generated growth in the off-highway and aerospace sectors, while solar sales were down. Industrial Motion’s adjusted EBITDA margins came in at 21.5% of sales in the first quarter, up significantly from last year. The increase in segment margins reflects strong operational execution by the team, as well as the impact of higher volumes and favorable price/mix. Moving to slide 13, you can see that we generated operating cash flow of $39 million in the first quarter, and after CapEx, free cash flow was slightly positive. Keep in mind that the first quarter is typically our seasonally low quarter for free cash flow, and we expect cash flow to step up significantly as we move through the rest of the year.

From a capital allocation standpoint, we returned $53 million of cash to shareholders through share buybacks and dividends in the first quarter. Note that the board recently approved a new five-year share repurchase authorization for 10 million shares. Looking at the balance sheet, we ended the first quarter with net debt to adjusted EBITDA at 2.1 times, which is near the middle of our targeted range. Now let us turn to the current outlook for full year 2026 with a summary on slide 15. We are increasing our outlook across the board. Starting with net sales, we are raising our full-year outlook to an increase of 4% to 6% in total, up from the prior range of 2% to 4%. Organically, we now expect revenue to be up 3% at the midpoint, a one-point increase from the initial guide.

The current outlook also adds 1% for M&A to include the expected revenue for the Bijur Delimon acquisition. We are still planning for currency to contribute around 1% to our revenue for the year, unchanged from our prior outlook. On the bottom line, we expect adjusted earnings per share in the range of $5.75 to $6.25, up $0.25 at the midpoint versus the prior outlook. Note that the outlook assumes year-over-year earnings growth every quarter this year. The current earnings outlook implies that our 2026 consolidated adjusted EBITDA margin will be approximately 18% 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 approximately 30% for the full year.

For the second quarter, we expect organic revenue, adjusted EBITDA margins, and adjusted EPS to all be higher than last year. However, we expect adjusted EPS to be modestly lower sequentially compared to the first quarter to reflect incremental inflation and some customer activity we saw pulled forward from Q2 related to the uncertainty around the situation in The Middle East. Moving to free cash flow, we expect to generate $350 million to $375 million for the full year, or approximately 105% conversion on GAAP net income at the midpoint. On slide 16, we provide an updated view on our 2026 organic sales outlook by market sector, which includes the impact of both volumes and pricing. Note that we are raising our outlook for the heavy industries and off-highway sectors based on stronger-than-expected year-to-date performance and the positive trends we see in the order book.

Moving to slide 17, here we provide a bridge of the $0.25 per share increase to our 2026 adjusted EPS outlook at the midpoint. First, you can see a $0.20 positive impact from the organic sales change. Next, we are estimating an incremental $0.15 per share tailwind from tariffs versus our prior guide. This primarily reflects the lower tariff rate on India, and a modest net positive impact from the changes to Section 232 on April 6. And finally, we are factoring a $0.10 headwind into guidance to account for potential incremental cost inflation over the rest of the year. In summary, the company delivered better-than-expected first quarter results, and the team is committed to delivering the increased outlook for 2026. Let me turn it back over to Lucian for some final remarks before we open the line for questions.

Lucian Boldea: We entered 2026 with momentum, and this quarter reinforces our confidence in the path ahead. Our portfolio is becoming sharper, our 80/20 initiatives are accelerating, and we are executing with urgency to position The Timken Company for stronger growth and higher margins in 2026. I look forward to sharing more details with you soon at our Investor Day on May 20 in New York City.

Neil Andrew Frohnapple: This concludes our formal remarks. We will now open the call for questions.

Operator: Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Stephen Edward Volkmann with Jefferies. Your line is open. Please go ahead.

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Stephen Edward Volkmann: Hey. Good morning, everybody. Thank you for taking the question. I am going to dive in on the changed guidance, Michael, your slide 17, I guess. And I am curious about the tariffs, the $0.15 benefit. I assume that is mostly IEPA in India. Is there any scenario where you get, you know, rebates on what you have paid? And how are you thinking about that? And then, is there also some potential for additional tariffs as we go through these 301 kind of studies through the summer? Thanks.

Michael Discenza: Great. Well, good morning, Steve. Thank you for the questions. You sized it up right on the India part. We previously had talked about that, and so the change on IEPA and because India represents a large part of our imports into the U.S., that was one of the bigger impacts. And then the small net impact from the Section 232 change. So those are the big drivers on tariffs. As it relates to IEPA, the process is unfolding. We are following the process, and if and when we have something to communicate on that, we will relay that later. But nothing is assumed in our guidance for anything related to IEPA refunds. As far as additional tariffs, it is a fluid situation. Related to February, we think we have sized it up as best as possible, so I do not anticipate anything further. But, of course, as the administration announces further changes, that could impact us. And again, we would communicate that if and when that was appropriate.

Lucian Boldea: Good morning, Steve. Let me take your question on the $0.10 cost inflation. It is somewhat of a placeholder. I will tell you the degrees of what we are seeing today. It depends by region. In India, you are already experiencing an inflationary environment as we sit today. In China, not really, almost somewhat in the opposite direction. In Europe, you are starting to see signs of it, and in the U.S., not as much. Where we are already seeing the increases, we are underway with price increases, in some cases first round, in some cases second round. This is now for us not a new muscle. It is a well-exercised muscle. Customers understand. When you drive to the gas pump and the price of gasoline is higher, you understand that everything else is going up.

There is a level of understanding and appreciation that we are in this environment. We will continue to work with customers closely, and it is our best guess of what it can be at this point. We are seeing parts of it already, and we are taking action. We are prepared, and we are in communications with our customers to be sure that we overcome this headwind.

Stephen Edward Volkmann: Great. That is helpful. Thanks. I will pass it on.

Operator: Your next question comes from the line of David Raso with Evercore. Your line is open. Please go ahead.

David Raso: Hi. Thank you for the time. I was just curious. With the rest-of-the-year guide implying somewhat notably slower organic, right, about 2.5% versus the 4.3% in the first quarter, given a lot of the positive commentary around the end market, can you maybe help us a little bit? How much business do you think got pulled from Q2 to Q1? Or should we look at the organic guide as maybe some level of conservatism? And I just wanted also to ask, just given the meeting coming up in two weeks, anything you wanted to put out there as what we should expect at the meeting, especially given the 80/20 rollout now being a little broader and the recent M&A in the last week or so? Just curious if things have changed a little bit in how you are thinking about timing of actions and so forth since when you first joined The Timken Company. Thank you.

Michael Discenza: Let me take the first part on the slower organic. Hard to say exactly how much was pulled from second quarter to first quarter, but from a top line standpoint, maybe about 1% top line. Normally, seasonally, we would step up from the first quarter to the second quarter a couple percent. We are now seeing that more flat. So we think about 1% was pulled forward. As it relates to the rest of the year, there is still a lot of uncertainty. Certainly, the Iran conflict creates further uncertainty. We do not have a lot of sales in The Middle East, so it is not necessarily a direct impact, but the impact around the world on the macroeconomies could pull down that organic growth. We are still expecting growth year over year for the rest of the year, but we are taking into account a bit of that Iran conflict impact.

Lucian Boldea: If you look at normal seasonality as you head from Q1 to Q2, you would normally expect a couple percent step up. As Michael said, we have pulled maybe 1% out of Q2 into Q1. Something more flattish is probably more consistent with historic seasonality by the time you account for that pull-forward. The good news is we do not yet see demand destruction from the conflict. We see inflationary pressure, but we do not see demand destruction. The pipeline remains robust. The order book remains very robust. The order book was up year over year and also grew sequentially, which is very encouraging. All in all, we remain cautiously optimistic. To your second question on Investor Day, the main objective is to detail our strategy and the long-term vision, and then give you a double click on how we are doing on our transformation, what that looks like, and the execution discipline behind it.

We will provide more detail on the actions we have already taken on 80/20, try to quantify those on the portfolio, and provide a roadmap on where we are headed, plus financial targets and a multiyear projection. We are very excited to share all that with you on May 20.

Operator: Your next question comes from the line of Robert Cameron Wertheimer with Melius Research. Your line is open. Please go ahead.

Robert Cameron Wertheimer: Yes. Hi. Good morning. You had a few things go right to help raise the full-year outlook, and I wonder if you could attribute that to end-market strength or some of the 80/20 and other initiatives that are already paying off? That is the first question.

Lucian Boldea: We outlined a few things, and no doubt market demand helped. We communicated in Q3 and Q4 that we were seeing positive momentum on book-to-bill and building the order book. That definitely helped. But we have done quite a bit of self help as well. One of the growth vectors I was most bullish about from day one—and with every day that goes by, I am more excited about it—is regional growth. We have an entire portfolio in the Industrial Motion acquired businesses that are more regional in nature. Taking those businesses into new regions is an important vector. For example, the linear motion business is primarily a German and Italian business. Taking that to the rest of Europe and into The Americas provides a significant growth factor.

That linear motion business alone is growing double-digit in The Americas off a lower base, and we are winning in warehouse automation and other applications that are outgrowing. It is a combination of self help and the market. On 80/20, the impact right now is less on quantitative simplification and more on mindset. We have adopted the mindset of doubling down in the markets and industries where we are winning and investing less where we are not. That is already paying off. We have reorganized our commercial teams, verticalized them, and built regional teams with autonomy to operate under a global framework. Those things are already showing. In some regions we are defying gravity a bit versus competitors—nice run in Europe, continuing good run in places like India and the U.S.—driven in part by focus.

Operator: Your next question comes from the line of Angel Castillo with Morgan Stanley. Your line is open. Please go ahead.

Angel Castillo: Hi. Good morning, and thanks for taking my question. Lucian, I was hoping we could unpack a little bit more of the backlog. You said it is up sequentially and year over year. Any way to quantify that for us and any particular pockets around markets where you are seeing more of a boost in the backlog? Would love any color on order activity in April versus March. I think you mentioned you are seeing activity more flattish in Q2 versus Q1 due to some pull forward. Are you seeing that reflected in your orders, and how does that compare as we think about the degree of conservatism on how much was pulled forward versus underlying demand?

Lucian Boldea: The order book was up significantly year over year. The leaders are off-highway, aerospace, rail, and wind—those are the four verticals most contributing. Significant momentum in The Americas, Europe doing pretty well, India doing quite well, China still a little soft. We are encouraged that the order book was up sequentially versus Q4. Translating order book math into precise quarterly revenue math is challenging because of shorter- and longer-cycle businesses, but over time when the order book is up significantly, that flows through revenue, which is why we are encouraged. In Q1 we saw strong activity across both segments. The Americas was a big region for that. Power gen was strong, metals was strong, general industrial was strong.

We have been cautious not to hang our hat on this too early because the market may not be fully taking into account The Middle East disruption; the order books and demand are not reflecting it. We see inflationary pressure, but no impact on demand yet. History would say there might be some impact at some point, which gives us a reason for caution. As for April, it is off to a good start—about where we thought we would be. Whatever dynamic drove March being a little stronger—customers realized they are in an inflationary environment and an environment of supply chain uncertainties, so more product sooner is better—persists in April. The pull-forward was modest, about 1%. April is consistent with what we expected in terms of revenue and continued strength in building the order book.

Angel Castillo: Thank you. And then to take this together and think about the segments and the cadence you ultimately expect for sales and margins from Q2 through Q4, could you help at the segment level? And on price/cost, you indicated the $0.10 is baking in potential inflation. Are the price increases you are starting to action also assumed in guidance, or are you waiting to see how those go through before embedding them?

Lucian Boldea: We have only embedded prices that we already see in the guide. Part of that $0.10 is probably embedded with corresponding price, but not all yet. There is timing on when you get the inflationary increase and when prices actually flow through the P&L. It is more prudent not to have all that perfectly matched yet. For the rest of the year, we expect the trend to continue where you see a little more growth in Industrial Motion than in Engineered Bearings. Looking at the first half being up around 2% to 3%, that is what we expect right now when we look at the drivers and how those are reflected in the two segments.

Operator: Your next question comes from the line of Kyle David Menges with Citigroup. Your line is open. Please go ahead.

Kyle David Menges: Thank you. I was hoping we could talk a little bit more about the portfolio transformation and maybe the M&A pipeline. I know we will hear more at the Investor Day, but Lucian, do we already have a pretty good idea of the focus areas for M&A? How is that pipeline building now that I am assuming you have a pretty good idea of where you want to expand inorganically?

Lucian Boldea: Thank you. It is still a work in progress. There are different phases to portfolio transformation. First, with an 80/20 lens, identify portions of the portfolio where we are not the natural owner and take action. We committed about a quarter ago to take action on up to a single-digit percent of the portfolio. If you look at actions already communicated—around auto OEM and the divestiture of the Belts business—that is now the majority of that single-digit percent. From a divestiture standpoint, we have tackled the majority of what needs to be tackled. From an acquisition standpoint, in the short term, until we have our strategy fully defined and laid out, we will be a little more middle-of-the-fairway and opportunistic.

Bijur Delimon is a great example—it became actionable mid to late Q4, and we moved with speed. From first discussions to close was around 90 days. It fits naturally in our portfolio. It is hard to find who are the Bijur people and who are The Timken Company people because they are in the same industry with complementary market coverage, product lines, and regional coverage. We want more of those. To the extent opportunities on our list become available, we are prepared to act quickly. Opportunistic ones you will see us act quickly. More transformational moves will be post communicating our strategy, outlining growth verticals, and positions we are trying to build. We will highlight at Investor Day a time-horizon approach to transformation.

In the short to medium term, the M&A playbook is to build out platforms—our lubrication platform is now $400+ million with a runway to $500 million, our linear motion platform is comparable—building these $0.5 billion platforms across the enterprise with market-leading positions.

Kyle David Menges: That is helpful. And then more color on the Belts divestiture—how it came together, anything you are willing to share on the financial profile of that business as well, and after this is sold, does that also reduce the tariff impact for The Timken Company?

Lucian Boldea: Belts is very consistent with our near-term strategic priorities and 80/20, and it is a great example of a business ending up with a natural owner. I am happy for our Timken team members in the Belts business to be part of Gates. We will quantify more at Investor Day, but it will structurally increase profitability two ways: it mixes us up, and it allows redeployment of resources to faster-growing areas. It will structurally increase adjusted EBITDA margins of the Industrial Motion business. Keep in mind practicality: we expect close sometime in Q3. There is an element of stranded cost to address to get the full benefit. There will be a mix lift on day one, but to get the full lift, we have some self help to do, which we will move on quickly.

Operator: Your next question comes from the line of Robert Stephen Barger with KeyBanc Capital Markets. Your line is open. Please go ahead.

Robert Stephen Barger: Thanks. First one for Michael. Going back to the cadence for the quarters and the sequential decline in Q2 EPS, will Q2 still be the high point for the next three quarters? Or will Q2 and Q3 be relatively even before the normal seasonal step down in Q4?

Michael Discenza: Morning, Steve. Thanks for the question. We would expect a normal seasonal step down from Q2 to Q3 and then Q3 to Q4. We do have typical seasonality built in. Since EPS is coming down sequentially from Q1, Q1 would be the high point, Q2 a little lower, and then normal step downs.

Robert Stephen Barger: Got it. Thanks. And then for Lucian, it is kind of a two-speed industrial world with aerospace and defense, data center, grid infrastructure all showing great demand, and a more restrained general industrial. Are there standout opportunities where The Timken Company currently does not participate? And can you talk about humanoids given increasing news flow and investor interest?

Lucian Boldea: We do participate in some of those verticals, but we have upside. I have been bullish on power generation and utilities from the day I got here and continue to be. We have a better footprint than we have talked about. Those verticals drive the need for infrastructure, which pulls through heavy equipment and off-highway. On humanoids, the problem they are solving is the skill gap in labor, both quantity and quality, due to demographics and how people want to live and work. Automation in general fills that need, and humanoids are a subset. In industrial automation, the portfolio we have built through acquisitions is remarkable. Our internal CAGR has been double-digit in that market since 2018. We decided to double down on it.

How we participate: think about Cone Drive and Spinea offering harmonic and cycloidal drives, Rollon offering linear actuators that create the seventh axis, medical robots via CGI precision gearing, Timken bearings and Cone Drive harmonic solutions, AGVs via Cone Drive and Rollon, and humanoids and exoskeletons where Cone Drive and Timken bearings are already present. We will have our newly appointed Chief Technology Officer talk more at Investor Day about the opportunity and how we plan to go after it. We are nicely positioned to benefit.

Robert Stephen Barger: That is really good color. Thanks. Just one quick follow-up. Are you seeing the secondary infrastructure play come through in off-highway specifically, or is that more cyclical recovery?

Lucian Boldea: It is hard to fully separate. Regionally there is an uptick, and net growth is driven by those macro trends. Data centers and utilities require significant construction and infrastructure, which requires heavy equipment. Our customers highlight that as a big driver. From our chair, we see the order book beefing up and the pipeline getting stronger from those customers. It is a combination of recovery and macro trends.

Michael Discenza: Maybe add some color. In addition to the infrastructure Lucian highlighted, we are seeing some green shoots in ag. Part of off-highway—the ag business, which we have talked about as being down—we are starting to see green shoots there as well.

Operator: Your next question comes from the line of Tomo O’Sano with JPMorgan. Your line is open. Please go ahead.

Tomo O’Sano: Hi. Good morning, everyone. Thank you for taking my questions. Slide 16 shows improved outlooks across nearly all end markets, but your full-year organic growth guidance was raised to 3%. In Q1, most of the organic growth appeared to be price driven rather than volumes. Given the broader-based end-market improvement and the PMI of about 50, should we expect a greater contribution from volume in the coming quarters, or will organic growth remain primarily price led?

Lucian Boldea: You have two factors. Year-over-year pricing comparisons will dampen because we picked up price during last year, so you get less contribution from that, and you also get less contribution from FX. The proportion of growth that comes from volume will be a little higher for the reasons you mentioned, and that is true for organic growth as well.

Tomo O’Sano: Thank you. And on the ongoing 80/20 initiatives and portfolio rationalization, is there any intentional short-term restraint on volume growth as you focus on higher-margin products and customers?

Lucian Boldea: The intent of 80/20 is growth, not to prune and shrink to perfection. We will share more specific data at Investor Day, but very little pruning of revenue is required to dramatically affect complexity. The price of simplicity is a lot lower than you would expect in our portfolio. With the 300 people trained and our focus, there is way more energy on the eighties than on the twenties. We will take care of simplification, but it comes down to what happens when you double down and focus. A high percentage of our revenue is concentrated with a small number of customers. How do you serve those differently? Timing is perfect: order books are up, customers are motivated to find product, and there is geopolitical and supply chain uncertainty.

Customers are receptive to being treated differentially and committing more volume to us as we commit better service to them. I do not expect to see volume declines related to 80/20; I expect dramatic simplification and possibly volume increases. When you simplify your product slate in a factory, you reduce changeovers for short runs and run more efficiently for large customers with consistent demand. We will not go to high volume/low complexity, but even with our existing mix, getting more share of wallet will make a big difference. The whole motivation of 80/20 is growth.

Operator: Your next question comes from the line of Timothy W. Thein with Raymond James. Your line is open. Please go ahead.

Timothy W. Thein: Thank you. Good morning. I wanted to touch on price versus variable cost as we go through the year—how you are thinking about that. Historically, when markets inflect in more inflationary environments, there are some contractual constraints that limit timing and your ability to push price. Is that analogous now, and how do you expect price versus variable cost to behave for the balance of the year?

Lucian Boldea: This is a well-exercised muscle for us. The situation today is slightly different from before. When we started from no tariffs to tariffs, there was only one move on price—up for everybody everywhere. Now you have multiple dimensions that smooth out the curve: in some cases, tariffs going away where prices may be sticky, and in other cases inflation coming in where you have to price up. You have both areas under the curve—up and down—offsetting each other. There may be a little margin expansion in some cases, and short-term margin compression in others as you get prices up. It is a modest number compared to what we dealt with before. We put $10 million as a placeholder, but as of today we are not looking at that full amount. Smaller amounts and dynamics in both directions should allow us to do a better job than when it was a one-time big hit of tens of millions.

Timothy W. Thein: Understood. Thank you. And on Industrial Motion and the growth outlook there, I historically think of that as being more European exposed, which could be a concern given the current conflict and second-derivative impacts like higher oil. What underpins the outlook for Industrial Motion?

Lucian Boldea: Within Industrial Motion, linear motion and lubrication are majority European and together roughly half of the segment. But Cone Drive, Philadelphia Gear, and CGI are primarily U.S. businesses. Averaging it all out, it is not as heavily European as you might think. Philadelphia Gear is heavily exposed to defense/marine and is growing strongly. In Q1, linear motion growth was driven by The Americas—automation projects in the U.S. drove it. For lubrication, historically a European business, Bijur Delimon brings a heavy Asia footprint, a lot in India, and rail—where we did not have as strong a footprint—which provides a growth vector. Being up in off-highway and general industrial helps lubrication. Ag picking up helps Industrial Motion through chain and other products.

Couplings, clutches, and seals for off-highway and industrial distribution also help, and those are more U.S.-based. We feel good about Industrial Motion’s position and how Industrial Motion and Engineered Bearings are coming together. We will spend time at Investor Day explaining how the combined sales motion creates a unique customer value proposition.

Operator: Your next question comes from the line of Michael Shlisky with D.A. Davidson. Your line is open. Please go ahead.

Michael Shlisky: Hello. Thanks for taking my questions. On ag and the green shoots you are seeing, is it replacement demand and parts versus OEM? Are you getting any commentary from the OEMs—are some of your customers looking to increase production in the fourth quarter of this year in advance of making 2027 models or a better outlook for 2027?

Michael Discenza: Hey, Mike. Thanks for the question. On the last part first, we cannot really comment on how fourth quarter is shaping up beyond our guidance framework, and as it gets closer to 2027, we will be able to give you some outlook. As it relates specifically to ag, we are seeing increasing order books. It is hard to know if it is restocking versus OEM. I would assume a little of both. It is just now turning from what has been a pretty long down cycle. We will see what that turns into, but right now it is just beginnings of green shoots.

Lucian Boldea: Year-over-year math looks compelling, but on a longer time horizon, part of it is comp off a very low base. It is hard to draw long-term conclusions based on that, but it is certainly no longer a year-over-year headwind; it is now more of a tailwind.

Michael Shlisky: Understood. And a quick housekeeping question. The Belts business sold to Gates has not technically closed yet. Is that still part of the guidance, and because it is currently a headwind to EBITDA margins, once it is officially closed would you increase your margin outlook again?

Michael Discenza: That is correct. Until the transaction closes, it is part of our guidance. As we said, we expect a structural improvement to Industrial Motion margins post-closing. At Investor Day, we will lay this out more clearly so you can see the exact margin impact.

Lucian Boldea: Keep in mind practicality. We expect close in Q3, and then we will address stranded costs to get the full benefit. There will be a mix lift day one, but to get the full lift, we have some self help to do, which we will move on quickly.

Operator: There are no remaining questions at this time. Sir, do you have any final comments or remarks?

Neil Andrew Frohnapple: 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.

Operator: Thank you for participating in The Timken Company’s first quarter earnings release conference call. You may now disconnect.

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