Timken Company (NYSE: TKR) 2026 Conference Summary Company Overview - **Company**: Timken Company - **Industry**: Machinery and Industrial Components - **Date of Conference**: February 18, 2026 Key Points Company Position and Financial Health - The company is experiencing strong cash generation and has a healthy balance sheet, indicating a solid financial position at the bottom of the industrial cycle [4][21] - Timken has made significant progress in divesting from automotive businesses and is now focused on growth opportunities [4][5] Strategic Priorities - The 80/20 strategy is a key focus, aiming to concentrate resources on the most profitable segments while discontinuing less profitable ones [6][10] - The company plans to simplify operations and customer mix to enhance efficiency and reduce costs [7][8] - Timken is committed to organic growth while also considering inorganic growth through mergers and acquisitions (M&A) [12][22] Growth Opportunities - The company is targeting growth in sectors such as automation, renewable energy, and defense, which are expected to drive demand [20][23] - Timken's industrial motions portfolio is positioned for global expansion, particularly in linear motion and lubrication businesses [13][14] Market Outlook - The company anticipates a 2% organic sales growth for 2026, driven by a combination of pricing and volume increases [35] - Key growth markets include aerospace and defense, renewable energy (with a focus on wind), and rail, while agriculture remains slow [39][40] Capital Allocation and M&A Strategy - Timken has maintained a disciplined capital allocation strategy, with a leverage target of 1.5-2.5 times [21][22] - The company has repurchased over 25% of its shares since 2013 and continues to view M&A as an attractive opportunity [22][23] - The M&A pipeline includes both smaller strategic acquisitions and potential transformative deals, focusing on macro trends like automation and electrification [23][24] Cost Management and Margin Outlook - Timken expects to be price-cost positive in 2026, with efforts to recapture margins lost due to tariffs [44][46] - The company is implementing cost-saving measures and has closed plants to reduce stranded costs, which will positively impact margins [46][49] Future Developments - The upcoming Investor Day will outline both short- to medium-term performance improvements and long-term transformation strategies [64][66] - The focus will be on elevating current performance and aligning technologies with macro trends to drive future growth [66][67] Automation and Labor - Timken is leveraging automation in its manufacturing processes, particularly in new state-of-the-art facilities in Asia [60][61] - The company is addressing labor challenges by enhancing automation and improving operational efficiencies [60][62] Conclusion - Timken Company is well-positioned for growth with a strong financial foundation, strategic focus on high-growth markets, and a commitment to operational efficiency and innovation. The upcoming Investor Day is expected to provide further insights into the company's future direction and growth strategies [66][67]

Financial Data and Key Metrics Changes - The company reported record revenue, EBITDA, and earnings per share for both Q4 and the full year 2025, with revenue growth of 4% in Q4 and 5% for the full year [8][9] - Full-year EBITDA margin expanded by 160 basis points to 22.2%, with quarterly EBITDA margin at 23.2%, up 220 basis points year-over-year [9] - The company achieved a record quarterly EPS of $1.42, representing a 20% increase over the prior year [9] Business Line Data and Key Metrics Changes - Measurement and Control Solutions (MCS) saw orders up 22% in Q4, driven by smart metering demand, with revenue up 10% [10] - Water Infrastructure orders were down 1% in Q4, with revenue flat due to strong demand in the U.S. offset by a nearly 30% decline in China [10] - Applied Water orders increased by 5%, with revenues up 3%, primarily driven by strength in U.S. commercial buildings [11] - Water Solutions and Services (WSS) reported a 7% increase in orders and 4% revenue growth, with an EBITDA margin of 23.9%, up 110 basis points year-over-year [11] Market Data and Key Metrics Changes - The backlog finished at $4.6 billion, with a book-to-bill ratio near 1 for both the quarter and the full year [8] - The company anticipates resilient demand in its largest end markets, despite short-term headwinds from strategic walkaways from lower-quality revenue [6][12] Company Strategy and Development Direction - The company is entering phase two of its transformation, focusing on strengthening its growth engine through sales force effectiveness, product management, and innovation [5][6] - Phase three will involve investing in long-term competitiveness and expanding into attractive future water markets [6] - The company is committed to simplifying its product offerings and enhancing customer focus, which may create short-term top-line headwinds but aims to drive higher-quality earnings [6][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in resilient demand and strong backlog conversion, expecting to build on commercial and operational momentum in 2026 [6][17] - The company is monitoring broader market conditions, including tariffs, but maintains a positive outlook for the year [17] - Management highlighted the importance of water as a foundational element for economic growth and the need for innovative solutions in the water sector [18][19] Other Important Information - The company plans to close the divestiture of its international metering business by the end of Q1 2026, with an EPS impact of $0.02-$0.03 [72] - The company is targeting around $1 billion a year for capital deployment towards M&A, focusing on small to medium bolt-on acquisitions [41] Q&A Session Summary Question: Can you provide a two-year progress report on margin improvement and portfolio optimization? - Management acknowledged significant progress in operational model transformation and integration of Evoqua, with early delivery of synergies [26][28] Question: Why is the 80/20 walk-away revenue increasing into the second year? - Management explained that the 80/20 approach is becoming integral to operations, focusing on resource allocation and optimizing overhead to support long-term growth [32][33] Question: When will the 80/20 actions transition from a headwind to a tailwind? - Management indicated that 2026 is an inflection point, with expectations for improved sales force effectiveness and customer focus [40] Question: What is the outlook for the backlog and project hesitancy? - Management noted that the backlog is healthy but acknowledged project delays due to various factors, including inflation and project scope changes [50][68] Question: What are the expectations for smart meters and project delays? - Management remains confident in MCS achieving high single-digit growth long-term, attributing near-term challenges to project timing and backlog normalization [58] Question: What is the impact of divestitures on EPS? - The divestiture of the international metering business is expected to have a small EPS impact of $0.02-$0.03 for the year [72]

Third Quarter Fiscal 2026 February 5, 2026 NEIL BRINKER President and Chief Executive Officer MICK LUCARELI Executive Vice President and Chief Financial Officer KATHY POWERS Vice President, Treasurer, and Investor Relations 2 Forward-Looking Statements ▪ Significant progress evolving our business portfolio by investing in high-growth, high-margin businesses and executing strategic divestitures ▪ Recently announced our plan to spin-off the Performance Technologies segment and combine with Gentherm; with Modi ...