Welcome to the Park-Ohio Holdings Group Corp third quarter 2025 results conference call and webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. If anyone should require operator assistance, please press star zero. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Chairman and CEO, Matt Crawford. Please go ahead, sir. Thank you, Kevin, and welcome to our third quarter call. Our third quarter was highlighted by our continued transformation into a leaner, more predictable business through the business cycle. While many end markets, particularly here in the U.S., where we derive a majority of our sales, showed mixed demand, we were able to demonstrate consistent operating profit and margin performance. While we do not anticipate a meaningful rebound in demand during the fourth quarter, we do expect to build on these initiatives as we move into 2026 and will also benefit from new business and strong backlogs. We use the word transformation here quite a bit, and I want to be more precise regarding what that means as we move towards 2026. Our transformation began several years ago as we challenged our capital allocation model and shed assets that were either underperforming or we felt were ill-suited for a higher growth, higher margin, and less capital-intense business. We then began to invest more urgently in those businesses which we have great opportunities for significant operating leverage and include clear competitive moats. While this model continued to support some level of acquisition, we were and are more focused on long-term competitive advantage, the right kind of products and services, and customer partnerships. During 2025, we have seen this transition take hold. While mixed demand signals from our diverse customer base have muted the improvements in our operating execution and quality of earnings, we see the improvements and also have seen a more consistent stream of earnings results despite the underlying volatility. We firmly believe that in 2026, there will be another important step forward as we combine these productivity improvements with new business and strong backlogs. Equally important is that we expect to do these things while reducing debt meaningfully during the fourth quarter and will continue that trend into 2026. I want to thank and applaud the effort of our entire Park-Ohio team as we manage the challenges of today with an eye toward the exciting times ahead. Pat, can you cover the third quarter for us, please? Thank you, Matt. Our third quarter results were generally in line with our expectations for the quarter given the mixed industrial environment, and we continue to see positive trends in each of our business segments. Before I get into the details of our third quarter results, I want to provide a few highlights achieved during the quarter. First, as we previously announced, we refinanced both our senior notes and our revolving credit facility, extending maturity dates by five years and strengthening our balance sheet and liquidity. We incurred bond-related expenses of $2 million related to the redemption of our previous bonds, including a non-cash write-off of unamortized costs. These expenses reduced our GAAP earnings during the quarter by $0.11 per share. In connection with the refinancing of our bonds, we received upgraded ratings on the new senior secured notes from Moody's, S&P Global, and Fitch Ratings. Second, we continued to make strategic capital investments in new technology and information systems, capacity expansion, and margin improvement initiatives. These investments will enable sales growth and higher profitability in the future. Finally, new equipment orders in our industrial equipment business continue to be very strong, with new bookings and backlogs at record high levels at most locations. Our business strategy focuses on end market and application diversification beyond traditional end markets. Most notably, we continue to see strong order activity in the electrical steel processing to support both expanded application usages and electrical grid infrastructure and in the defense markets for munitions and shell production and armored vehicle protection plating. Bookings year to date are highlighted by an order from a major steel producer totaling $47 million for induction slab heating equipment for high silicon steel production. Further enhancing the strong demand for our induction products is our global operational footprint, enabling our customers to diversify their supply chains with local content to help minimize their risks and reduce their overall costs. Backlogs as of September 30th were up 28% since year-end and are expected to remain strong heading into 2026. Turning now to our third quarter results, third quarter revenue totaled $399 million, which was stable in each business segment sequentially. The year-over-year sales decline was a result of lower end market demand, most notably in certain North American industrial end markets, which more than offset growth in Europe, where demand from electrical end markets continues to be strong. Third quarter gross margins of 16.7% were slightly below prior year's gross margins, demonstrating our pricing discipline and operational consistency despite modest volume pressure in certain end markets. Adjusted EPS was $0.65 per diluted share in the quarter, compared to $0.66 in the first quarter and $0.75 in the second quarter of this year. Results in the third quarter underscored cost control and productivity gains, offsetting higher interest expense of $1.1 million for our new senior secured notes, which reduced adjusted EPS by $0.07 per diluted share. We generated EBITDA of $34.2 million in the quarter. As a percentage of net sales, our EBITDA margin was 8.6% in the quarter. On a trailing 12-month basis, our EBITDA as defined totaled $140 million. In the quarter, we recorded an income tax benefit on pre-tax income of $4.5 million, driven by ongoing federal research and development credits and other discrete tax items. We expect our full-year effective tax rate to range between 13%-16%, reflecting the positive impact of ongoing tax initiatives. During the quarter, our working capital initiatives drove positive operating cash flow of $17 million. Compared to $9 million last year. We are currently estimating fourth quarter free cash flow to be strong and range between $45 million-$55 million. Full-year free cash flow is estimated to range between $10 million-$20 million, driven by reduced working capital levels in each business. Our liquidity continues to be strong and totaled $187 million as of September 30th, which consisted of approximately $51 million of cash on hand and $136 million of unused borrowing capacity under our various banking arrangements. Turning now to our segment results, Supply Technologies net sales of $186 million in the quarter were in line with sales in both the first and second quarters of this year. Sales were down compared to a year ago as lower customer demand and uncertainty in end markets, including industrial equipment, bus and coach, and consumer electronics, partially offset increases in electrical, heavy-duty truck, semiconductor, and agricultural end markets. Geographically, total sales in Europe were stronger year- over- year, but were offset by lower sales in North America and Asia on a year-over-year basis. Our proprietary fastener manufacturing business performed well in the quarter despite a slight decline in demand for its proprietary products, primarily in North America. Adjusted operating income in the segment totaled $18 million, an increase sequentially compared to last quarter and a decrease from $21 million in the prior year due to lower year-over-year sales. Adjusted operating margins increased 100 basis points to 9.9% in the current quarter compared to 8.9% last quarter and down from 10.5% a year ago. The overall operating margins in this segment continue to exceed historic levels due to efforts to improve operating efficiencies in our warehouses and manufacturing plants around the world. During the quarter, we completed the consolidation and expansion of certain facilities in the U.K. and Ireland in support of expected growth in the electrical distribution market, supporting the data center build-out. We recorded $1 million in expenses related to these activities and have added back these one-time non-recurring costs to arrive at adjusted earnings per share. We expect further expansion resulting from investments to optimize warehouse operations and manufacturing capacity around the world. Although current demand in several end markets has remained stable to slightly down year- over- year, we expect improved demand trends and average daily sales levels in 2026 in certain end markets, including power sports, agriculture, semiconductor, consumer electronics, and aerospace and defense. In our Assembly Components segment, sales improved sequentially to $97 million in the quarter. The sequential improvement compared to last quarter reflects increased production and new program launches beginning to ramp up. Segment-adjusted operating income of $6 million compared to $6.1 million last quarter and $6.6 million a year ago. In this segment, we continue to win new business in each of our product lines, which includes fuel filler and fuel rail products and molded and extruded rubber and plastic products. We are currently launching over $50 million of incremental business across all product lines throughout 2026. During the quarter, we incurred costs to expand our production capacity, improve asset utilizations, and expand our rubber mixing capacity to accommodate the sales growth in each of our product lines. These non-recurring costs are added back to arrive at our adjusted earnings in the quarter. In our Engineered Products segment, sales were $116 million compared to $124 million a year ago, with the decrease driven by lower demand in our forged and machine products business and lower levels of production in our industrial equipment facilities in North America and Asia. Aftermarket sales remained strong during the quarter throughout most of our global service centers. In our forged and machine products group, the lower sales were driven by lower rail car demand and the closure of a small manufacturing operation last year. New equipment bookings were $174 million in the first nine months of the year, and as I mentioned, we expect to achieve record annual bookings exceeding $200 million this year. Our capital equipment backlog continues to be strong, totaling $185 million, an increase of 28% compared to backlogs at the end of last year. In addition, order intake from aerospace and defense and power generation customers continues to be strong in our forging plant in Ohio. During the quarter, adjusted operating income in this segment was $3.7 million compared to $5.2 million a year ago. The decrease in profitability in the quarter was a result of the lower sales levels in our forged and machine products business. We continue to implement plan for improvements in this part of our business and our two forging plants, which will drive higher margins as sales volumes improve. I'll conclude my comments with an update on our current expectations for the full year. We expect full year 2025 net sales to be in the range of $1.6 billion-$1.62 billion and adjusted earnings per share to be in the range of $2.70-$2.90 per diluted share. We also expect full year free cash flow to be in the range of $10 million-$20 million. Fourth quarter free cash flow between $45 million-$55 million. Now I'll turn the call back over to Matt. Thanks, Pat. We'll now open the floor for questions. Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. One moment, please, while we pull for questions. Our first question is coming from Steve Barger from KeyBanc Capital Markets. Your line is now live. Good morning. Hey, Steve. This is actually Christian Zylon for Steve Barger. Good morning. Thank you. Good morning. First, morning, first question, kind of a two-part question. First, how are you accounting for the recent large orders in your EP backlog? Is that percentage of completion or completed contract? And then maybe just broader, do you expect that large order from last quarter to be largely delivered in 2026? I guess that would imply double-digit growth rate in EP, assuming a steady business otherwise. Can you just help us square that circle and how you're thinking about EP? Absolutely, Christian. This is Pat. Our contracts in that part of our business are accounted for using the percentage of completion method. As it relates to the large order of $47 million, it represents five pieces of equipment. We expect three of the five to be recognized during the course of 2026, with the latter two in the following year in 2027. Christian, I would just add that I think we've said it a lot, but I want to be crystal clear. We are seeing electrical infrastructure, industrial electrification, whether it be the single order we talked about or a myriad of orders related to graphite and other things that are important too. Again, the grid and battery technology are underpinning significant growth in this business, not just around that one order, around a myriad of orders globally. This is a very, very exciting part of our business, and we will see it begin to impact maybe a little bit at the end of the year, but really into 2026 and beyond. This is not something that is stopping. This is something that is beginning. We feel that that big order is really important, but also symbolic for what is happening in industrial electrification, where we are. Extremely well positioned, both from an OE perspective and an aftermarket perspective. This is one of the most exciting, and I think, as you know, why we have focused in our transformation a fair amount of energy around our business that focuses on this. But these. Understood. As Pat points out, these things are not built overnight. Even if you take percentage of completion, it'll be a little bit choppy, but we'll begin to see the benefit of it clearly going into 2026. Completely understood. I guess with those comments, just doing the math, I think $50 million of orders this quarter for EP. Solid momentum. The backlog's at, I think, record highs from what we can see. I guess a question on that is, with the orders that are coming in, the new business, and part of EP's margin performance in this quarter, are you having margin pressure from some of those front-end investments of your projects? Does that abate as we go into 2026 and 2027 as you see that business ramp? Or just how should we think about the ramp of those contracts in that business related to the margin cadence? Thank you. Yeah. No, that's a great question. Really good question. You're going to—I'm going to have to harp on transformation again. Let me start by saying again, I didn't misspeak, but I want you to understand the value stream we're talking about here. This is not just graphite and steel making. This is also mining, rare earth mineral mining, the Caterpillars of the world, all the people that make mining equipment. I mean, the distribution of the value stream and where we're seeing the benefit is remarkable. Again, we haven't seen much in the way of mining in a long time, and we are. I think there is some transition going on in the order book. I would also highlight defense. I know it's not related to this, but I highlight defense as well. There is a transition going on. Vis-à-vis our order book, and I think that we have seen this year, sort of a period of time in the third and fourth quarter where we were filling the order book and preparing to respond to this. We were onboarding people and preparing our facilities for what we think is a pretty long run. To some extent, clearing out some old jobs that we've mentioned in the past had had some challenges. I do feel as though there has been margin pressure, not from the customer standpoint, not from the market standpoint, but really around preparing this business for what we anticipate is going to be a heck of a run here on this backlog. I would also highlight that to say where we are seeing very strong performances in the aftermarket. We continue, I think, as we've discussed, a razor-razor blade model. Our expectation is that continues to underpin and pay for this transition as we modernize our key facilities, both here and in Europe. We are making some investments here around long-term competitiveness. You are right. We are seeing some cost pressure as we bring people on board to prepare for these orders. We are seeing some investment around modernizing these facilities, preparing for these large orders. This pipeline is a lot bigger than just that one order, I can tell you that. You are seeing it in the order book. It is not just steel. It is all aspects of that value stream, as well as defense and others. Got it. If I could just follow up on that, do you expect that margin pressure to then flip into a benefit in parts of 2026, or is that a 2027 event? Just how should we think about it in terms of the ramp versus the execution of the contract and when that business starts kind of flipping and performing as you expect? Yeah, Christian, I would—this is Pat again. Clearly, margins will begin to improve. As each individual contract is priced uniquely. Clearly, under the percentage of completion method, we're estimating our end margin on each of the jobs and recognizing that as we complete the job during the course. Coupled with aftermarket strong margins, we would expect margins in the industrial equipment side of our business to continue to improve. Keep in mind, this part of our business historically was our highest margin business. Between the repricing of the new jobs and various value drivers that we're implementing in each of the manufacturing facilities around the world, this will clearly have a benefit on future margins. Hey, Christian, I do not want to overstate. I hate to not be positive, but there are—and again, we are just finishing, I think, and closing out. As Pat mentioned, some of these jobs take 18 months to complete. A few of the jobs that have impaired profitability in 2025 have been related to orders that were placed a year or two ago where there were some challenges around inflation, around execution, around labor. Those are the kinds of risks that we are just not seeing in the marketplace now. You might or might not ask about tariffs. That is a positive for us here, not only in terms of our customers' health, but also in terms of our global footprint, allows us to be exceedingly nimble versus our competition on where and how we make this product. All the above, every one of those things I just talked about is a positive for margin accretion. To Pat's point, I do not really know another way to talk about it other than to say, for years, this business operated at 10%, and there is nothing about it that is worse today than it was then. The aftermarket mix is better. The margins are strong. The customer relationships are strong. Our locations and where we operate are appropriate and cost-effective. Like I said, we are spending some money to modernize some of the locations, which I think is great. This is an exciting time. Yes, I would expect to see meaningful progress in 2026, and not the end of 2026. Great. I appreciate that answer. If I could sneak in one more, and we appreciate you letting us take the time for the questions. Just last question on free cash flow, Pat. Your guide of $45-$55 would be a record free cash flow quarter. Can you just talk about what's embedded in that expectation? I mean, is that largely working capital benefits, less CapEx that quarter? Just what drove the overall difference or reduction from last quarter? Thank you guys so much. Appreciate the caller. No problem. Let's talk about the reduction from the guidance. The previous guidance was $65 million for the second half of the year. Our guidance for the quarter takes down the results of the third quarter, which was $7 million of free cash flow. What we're seeing throughout every one of our businesses is the growth in working capital that we've seen year- over- year has primarily been in receivables and a little bit in inventory. We're seeing the harvesting of many accounts and various working capital items in the fourth quarter, primarily receivables. In inventory, the management of Supply Technologies is reducing receipt activity, which will help lower inventory based on the revenues they're seeing in the fourth quarter and the first quarter. More importantly, is the reduction of days on hand and the ability to manage lead times better. As we ended last year with the threat of tariffs, there was a lot of pre-buy activity, a lot of excessive order. Taking buyer supply base and delivering into our facilities in the first half of the year. We now see lead times reducing dramatically. That helps days on hand. That helps our inventory levels. And we're seeing that happen. It began to happen in the third quarter, but significantly. Reducing levels in the fourth quarter. Christian, I might say it a different way too. I might just say that by historical standards, we are still not where we need to be in terms of our working capital efficiency. This is the fourth quarter begins to bring that back into line. Does not get us where we need to be. There is nothing underlying, no fundamental issue on that. It is as Pat described, our customers push-pull in terms of tariffs, push-pull in terms of demand planning, as well as new product launches that in some cases have been delayed, but we will see come to fruition as we get into 2026. All those things have made us less efficient managing working capital than we have been in the past, and we see a significant move stride forward. Some of which because new products will launch, some of which there's a little more clarity, if possible, on tariffs or at least supply chains. Some of which I think is because we're not necessarily expecting a big uptick in the economy, but at least people are getting accustomed to how to manage their supply chains. Great. That's all great color. Thank you, guys. Thank you. Thank you. Next question is coming from Dave Storms from Stonegate. Your line is now live. Morning. Thank you for taking my questions. Dave. Just wanted to start at a high level here. The latest macro headwind, potential macro headwind, is this government shutdown domestically. Are you seeing any impacts of that ripple through to your business lines? I don't have any explicit examples of that. I mean, we know it can't be good, right? We have not. As you know, Dave, we've seen a lot of strength across the business from defense. I am sure it has slowed down. The internal workings of some of the major orders or some of the updates or scope changes, the kinds of things that happen under the hood every day. I don't want to suggest that we're not probably seeing a little bit of adverse effect, but not in a way that would be important to explicitly discuss. That's perfect. Thank you. Yeah, I just wanted to check to see if. No, it's a great question. Yeah. Moving on, I did want to touch on supply tech too. It sounds like you're seeing some volume pressure in a couple of end markets and a couple of different geographies. It seems like pricing is still holding up. How sustainable do you think this is? Do you feel like we're maybe reaching an inflection point where margin can maybe get back to growing further in supply tech? I think that we did an incredible job last year, I think, in managing price. I think we've done a good job today with some of the tariff exposure, or this year with some of the tariff exposure we had. I think where we are today is more focused on strategic initiatives around growth. A return to growth to provide the operating leverage that we know exists in that business, which should take us to higher levels. Equally, some of the investments that we've talked about that will be transformative in terms of our costs and how we go to market. I talk a lot about competitive long-term advantages. Some of the infrastructure investments we're making around how we distribute product and how we manage data are going to be meaningful over years to come. I do think there's opportunity on the margin side, but to be clear, I think it's less today about pricing than it is about improving our competitiveness, as well as getting operating leverage that comes with some incremental volume. What's tough to manage in any business is volatility, right? It's not as simple as significant changes. It's the month-to-month variability. When you see across industrial America a gross number of things being billed, rates adjusted for inflation being down a little bit, that's one thing. The volatility is what's particularly hard to manage. We've seen a lot of that this year. I compliment the supply tech team and their service model being able to respond and react to somebody going from flat to down 10% one month, up 10% the next month. It's not as simple as everything just being down a couple of percent. It's been difficult to manage this year. Again, against the backdrop of what we expect to be a strong 2026, you got to manage that as well. Understood. That's great commentary there. Thank you. Just kind of sticking with that, as you're adding improvements, a macro theme for the last year or so has been the implementation of AI. Are you seeing any areas to strategically implement AI to further enhance your operations? We could spend a long time trying to define AI, but I'm going to answer emphatically yes in one particular way, and then a good conversation going forward. I'm going to answer emphatically that our investments in information technology over the last couple of years, which now include harnessing AI around cleaning data, around managing data, around investing in data management tools, these, I think, have been the building blocks to position ourselves for some of the use cases we're seeing on AI. When I think about business improvements that we'll see in 2026 and efficiencies we'll garner from the business, a lot of that, I think, is just from how we manage data differently and the quality of data we have today in our business. Particularly in supply technology, which is really a data business in many ways. That is where I think we're beginning to see the benefit and where we're beginning to see the building blocks of some of the use cases that are going to actually drive efficiencies in the business. We do see incremental improvement in the context I discussed. I think that as we build better and broader use cases across the business, that's going to be a bigger opportunity for us. The benefits today are more just on the data management side, AI or not. Understood. Thank you. One more for me, if I could sneak it in here. You pretty explicitly mentioned that your outlook for 2025 is meaningful cash generation with the goal of debt reduction. Are there any metrics that you could put around that debt reduction, maybe in terms of market debt levels or timelines? Yeah. The debt reduction as a result of the strong free cash flow in the quarter clearly will happen. When you look at the amount of the free cash flow for the full year, $10 million-$20 million, after the payment of our quarterly dividends, you can extract the debt reduction from that. It is roughly $5 million-$10 million year- over- year. As we step into next year and expect an improvement in free cash flow, that debt reduction will increase. Explicitly in the fourth quarter, the end of this quarter, the end of the fourth quarter, what do we expect to reduce debt? Of the $45 million-$55 million, we would expect $35 million-$45 million of debt reduction. Yeah. That's, I think, the answer to your question. Quarter- over- quarter. Quarter- over- quarter, we're expecting $35 million-$40 million of debt reduction from free cash flow. That's fantastic. Thank you very much for taking my questions, and good luck with Q4. Okay, Dave. Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments. Great. Thank you all, and thank you for your very important questions. It allowed us, I think, to highlight some of the positive changes happening in the business. We look to not only close out the year strong, but also to begin to set the table as we are for a really successful 2026. Thank you for your time today. Bye-bye. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.