Timken Reports Record First-Quarter 2023 Results; Raises Full-Year Outlook

Record sales of $1.26 billion, up 12 percent in total and 11 percent organically from last year

Record first-quarter EPS of $1.67; with all-time record quarterly adjusted EPS of $2.09

Net income margin of 10 percent; adjusted EBITDA margin of 21 percent

Raises 2023 outlook; now expects 2023 EPS of $5.90-$6.40, with adjusted EPS of $7.00-$7.50

The Timken Company (NYSE: TKR; www.timken.com), a global leader in engineered bearings and industrial motion products, today reported first-quarter 2023 sales of $1.26 billion, up 12.3 percent from the same period a year ago. The increase was driven by strong organic growth in both the Engineered Bearings and Industrial Motion segments, and the favorable impact of acquisitions (net of divestitures), partially offset by unfavorable foreign currency translation. Organically, first-quarter sales were up 10.9 percent versus the prior year.

Timken posted net income in the first quarter of $122.3 million or a record $1.67 per diluted share. This compares to net income of $118.2 million or $1.56 per diluted share for the same period a year ago.

Excluding special items (detailed in the attached tables), adjusted net income in the first quarter was $153.5 million or $2.09 per diluted share, an all-time record for any quarter. This compares to adjusted net income of $129.7 million or $1.72 per diluted share for the same period in 2022. Adjusted EBITDA in the quarter was $265.5 million or 21.0 percent of sales, compared with $225.1 million or 20.0 percent of sales in the first quarter of last year.

Net cash from operations for the quarter was $78.6 million and free cash flow was $36.9 million. During the quarter, the company returned $77.6 million of cash to shareholders through dividends and the repurchase of 670 thousand shares of company stock. In addition, the company acquired the assets of American Roller Bearing Co. at the end of January. Also, in early April, Timken completed its previously announced acquisition of Nadella Group, which expands and scales the company's leading linear motion product portfolio.

"Timken maintained its strong momentum and delivered an excellent start to the year, achieving record revenue and earnings per share in the first quarter while expanding operating margins," said Richard G. Kyle, Timken president and chief executive officer. "Our performance continues to demonstrate the value we can create for our stakeholders through dynamic macro environments."

First-Quarter 2023 Segment Results

Engineered Bearings sales of $900.7 million increased 16.6 percent from the same period a year ago. The increase was driven by organic growth across most sectors led by renewable energy, distribution and rail, and the favorable impact of acquisitions (net), partially offset by unfavorable foreign currency translation.

EBITDA for the quarter was $205.0 million or 22.8 percent of sales, compared with EBITDA of $168.3 million or 21.8 percent of sales for the same period a year ago. The increase in EBITDA was driven primarily by the impact of favorable price/mix, higher volume and lower material & logistics costs, as well as the benefit of acquisitions, partially offset by higher manufacturing and SG&A costs and the unfavorable impact of currency.

Excluding special items, adjusted EBITDA in the quarter was $203.8 million or 22.6 percent of sales, compared with $173.9 million or 22.5 percent of sales in the first quarter of last year.

Industrial Motion sales of $362.1 million increased 2.8 percent compared with the same period a year ago. The increase was driven by organic growth across most platforms led by automatic lubrication systems, partially offset by unfavorable foreign currency translation and the unfavorable impact of divestitures (net).

EBITDA for the quarter was $48.2 million or 13.3 percent of sales, compared with EBITDA of $62.4 million or 17.7 percent of sales for the same period a year ago. The decrease in EBITDA was driven primarily by a goodwill impairment charge in the current period related to the recent change in operating segments, as well as higher SG&A and manufacturing costs, partially offset by the impact of favorable price/mix and higher volume.

Excluding special items, adjusted EBITDA in the quarter was $76.9 million or 21.2 percent of sales, compared with $63.4 million or 18.0 percent of sales in the first quarter of last year.

2023 Outlook

Timken is increasing its 2023 outlook, with full-year earnings per diluted share now forecasted to be in the range of $5.90 to $6.40 and adjusted earnings per diluted share in the range of $7.00 to $7.50. The company is now planning for 2023 revenue to be up approximately 9.5 percent in total at the midpoint from 2022, an increase from its prior outlook of 6 percent growth at the midpoint.

"Timken is raising its full-year guidance to reflect the company's strong first-quarter performance, the impact of the Nadella acquisition and an improved outlook for the rest of the year," said Kyle. "We now expect operating margins to increase in 2023, reflecting favorable price-cost and better operational execution. While uncertainty remains elevated for the second half, our backlog is high and customer demand is strong."

Kyle continued, "We are confident in our ability to achieve higher performance in 2023 and beyond, as we continue to execute our strategy to advance Timken as a diversified industrial leader."

Conference Call Information

Timken will host a conference call today at 11 a.m. Eastern Time to review its financial results. Presentation materials will be available online in advance of the call for interested investors and securities analysts.