Good morning. I would like to welcome everyone to Kennametal's First Quarter Fiscal Year 2018 Earnings 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. Please note this event is being recorded. I would now like to turn the conference over to Kelly Boyer, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you, Denise. Welcome everyone and thank you for joining us to review Kennametal's first quarter fiscal 2018 results. We issued our quarterly earnings press release yesterday evening. The release along with the slide deck for today's call is posted on our website. This call is being broadcast live on our website and a recording of the call will be available for replay through December 2. I'm Kelly Boyer, Vice President of Investor Relations. Joining me on the call today are Chris Rossi, President and Chief Executive Officer; Jan Kees van Gaalen, Vice President and Chief Financial Officer; Patrick Watson, Vice President, Finance and Corporate Controller; Chuck Byrnes, President, Industrial Business Segment; Pete Dragich, President, Infrastructure Business Segment; and Alexander Broetz, President, Widia Business segment. Chris and Jan Kees will review the September quarter's operating and financial performance, as well as our updated outlook. After their prepared remarks, we will be happy to answer your questions. At this time, I would like to direct your attention to our forward-looking disclosure statement. Today's discussion contains comments that constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of assumptions, risks and uncertainties that could cause the company's actual results, performance or achievements to differ materially from those expressed in or implied by such forward-looking statements. These risk factors and uncertainties are detailed in Kennametal's SEC filings. In addition, we will be discussing non-GAAP financial measures on the call today. Reconciliations to GAAP financial measures that we believe are most directly comparable can be found at the back of the slide deck and on our Form 8-K on our website. With that, I'd now like to turn the call over to Chris.

Thank you, Kelly. Hello, everyone, and thank you for your interest in Kennametal. This is technically my second conference call as CEO of Kennametal. You may recall that I was on the August 3 call two days after joining the company. Well, I'm a bit more settled in now to both Kennametal and Pittsburgh and certainly pleased to review the company's performance with you today. Kennametal has gone through a significant amount of change in the last year, including reducing head count by over 10%, reorganizing into P&Ls and launching a set of growth, simplification and modernization initiatives to improve margins and position the company to perform well in all market conditions. Over the past three months, I've had the opportunity to meet with many employees and review our improvement plans in more detail. I'm delighted to report that we have a committed and energized team that's aggressively driving a solid plan for improvement. And I'm focused on supporting them, making sure we accomplish what we've started and accelerating progress. Turning now to our quarterly results, I'll begin with some overview comments, Jan Kees will discuss the specific financial results and I will again provide a quick summary before taking your questions. As Kelly noted in her introduction, the management team is also on the call today. Let's begin on slide 2 of the slide deck that's posted on your website. Our first quarter fiscal 2018 results exceeded our expectation in a number of ways. First, the growth rate for the quarter was 14%. All segments experienced significant growth over the prior year period with Infrastructure at 20%, Industrial 11% and Widia at 10%. Furthermore, all regions grew with Asia Pacific leading at 15%, followed by the Americas at 13% and EMEA at 8%. All end markets reported growth as…

Thank you, Chris. Good morning, and hello, everyone. Let me walk you through the net income statement starting on slide 7 on both reported and adjusted basis. On a reported basis, EPS for the quarter was $0.48 per share compared to a loss per share of $0.27 in the prior year quarter. Sales in the September quarter increased 14% to $542 million, with organic sales growth posting in at 13%. Currency tailwinds favorably impacted sales by 2%, partially offset by a 1% impact of fewer business days. As Chris mentioned, sales grew in every end market and every geographic region. Adjusted gross profit increased 28% to $186 million this quarter over prior year quarter. Adjusted gross profit margin increased by 380 basis points year-over-year to 34.3%. The main factors at the gross margin level were organic sales growth, incremental benefits from restructuring initiatives, favorable mix, higher productivity and fixed cost absorption and favorable foreign exchange, partially offset by higher compensation expense and higher raw material costs. Adjusted operating expenses were held flat at $119 million, despite increased volume. On a percentage of sales basis, adjusted operating expenses improved by 290 basis points to 22%. We're pleased with the progress we've made, particularly given the firmer end market environment and we'll continue to focus on further improvements as we move forward. The improvements in both gross profit margin and operating expense margin contributed to operating income margin increasing significantly year-over-year by 700 basis points, in margin terms to 11.7%. For the first quarter of fiscal 2018, the adjusted EBITDA was $89 million, up 81% from the prior year period. The effective tax rate for the quarter on an adjusted basis was 18% versus 38.7% in the prior year quarter. The change was primarily driven by U.S. losses in the prior year…

Thank you, Jan Kees. Turning to slide 13, the outlook for fiscal year 2018. We're increasing our expectations for organic sales growth for full year 2018 to 5% to 7% and full year adjusted EPS to be between $2.30 and $2.60, reflecting the increased sales and continuing success in our growth, simplification and modernization initiatives. The range for our effective tax rate remains at 18% to 22%. The expectations for free operating cash flow and capital are also unchanged, with free operating cash flow remaining slightly positive for the full year, even at our increased capital spending levels. We look forward to our upcoming Investor Day on December 12 to provide more detailed look at our multi-year plan. To summarize on slide 14, our Q1 was better than expected. Our balance sheet improved over the quarter. We're focused on executing on our improvement programs to create meaningful returns for our shareholders, great products and services for our customers, and a great place to work for our team members. Operator, please open it up for questions.

Thank you Mr. Rossi. And your first question this morning will come from Ann Duignan of JPMorgan. Please go ahead.

Hi. Good morning, guys.

Good morning, Ann.

Good morning, Ann.

I won't take a joke about my last name, but anyway. Given the strength of Q1, could you just talk a little bit about what you're now contemplating first half, second half sales split and earnings split, just the cadence maybe?

Yeah. We're expecting the earnings split to be sort of in a more typical year in this 40% to 45% in the first half with 50% to 55% on the second half on the earnings side.

Sales will be a little more weighted to the back half.

To the back half.

Much more typical seasonality.

Okay. Because I think last quarter you had anticipated EPS about $0.33 to $0.67, so we're not as back-end loaded now given Q1.

Exactly. We see it's a little bit more of a typical year this year, Ann.

Okay. Good. Thank you. And then could you also address material cost versus pricing, what you had embedded in the forecast?

Yeah. Our forecast contemplates that we will basically be able to offset any material cost increase with price in the marketplace. And so far so good. The markets reacted to that because, as you know, once our material costs go up that's an indication that there is a lot of activity in the marketplace. So it's not completely unexpected by our customers and we think that's a good assumption going forward.

Okay. And I assume when you talk raw material cost increases, you're talking tungsten primarily. Is that correct?

We're talking tungsten, which is certainly the biggest driver for the company. A distant second is cobalt and a distant third would be steel.

Okay. Thank you. I appreciate that. I'll get back in line.

Thank you, Ann.

Thanks, Ann.

The next question will come from Stephen Volkmann of Jefferies. Please go ahead.

Hi. Good morning.

Good morning, Stephen.

Good morning, Stephen.

Can I poke a little bit more on the price side of this? And we had been hearing from the channel that there had been some price increases around October 1, which I guess wouldn't have included this most recent quarter and, obviously, I might have just picked up a weird data point. But I'm curious just on the pricing side itself. You mentioned in the prepared remarks some opportunity to price for the value you're bringing and so forth. Is the price side of the equation going to sort of ramp up as the year progresses from here?

Yeah. I think maybe what you remember is that we had gone out with a price change in July and we said that that would begin to flow to the P&L in October timeframe. And so pricing – some price increases will sort of adjust automatically based on the contracts we have. Others, Stephen, we have to go in and sell to the marketplace. But, in many cases, clients have experienced improved productivity from our tooling over the years, because we made improvements. We haven't actually gone out with a, what I would call, value pricing. So, Chuck and the other business segment leaders are committed to go into customers and, say, look we're getting – you're getting much more value from these tools. We haven't had actually a price increase in several years. And so that's kind of an ongoing process and one that we're going to continue to push.

So it sounds like the price-cost equation maybe gets a little bit more favorable in the remainder of the fiscal year or am I putting words in your mouth?

I think that's fair.

Okay. Great. And then, can I just ask you for a little more detail on the customers that you're shifting to the indirect channel? I think you said 4,200 so far. What do we think the total will be? Kind of, what inning of that game are we in?

I'm going to let Chuck give you some color around that whole initiative.

Sure, Stephen. We're pleased with the progress that we've achieved to-date on the 4,200 plus customers transitioned. This process will never end. We're always going to look for the proper way to service every end user customer and the value that our distributor partners can provide. I would say there's another 1,000 that we will probably approach in this fiscal year, and our hit rate is typically around 90%. So, I wouldn't think 5,000 total by the end of this fiscal year would be out of our reach.

Okay. Great. And if I could just sneak one more in, Chris, now that you have a quarter under your belt, as you look at the plan that's been sort of laid out here, any tweaks that you want to make or any kind of conclusions that you've come to in your first quarter of at the helm would be great.

Yeah. Obviously, Steve, that was first on my mind to really understand what the plan is and how we're going to execute it. And I was delighted to find that it's really quite well thought out. Obviously, we're putting more meat on the bone in terms of what's going got to happen in 2019, because we have – we're a year into this thing. So – but I was generally pleased that it is a solid plan. There is a path there. And we really would look forward to updating you folks in more detail at our December 12 Investor Day.

Okay. Good enough. We'll wait for that. Thank you.

The next question will be from Julian Mitchell of Credit Suisse. Please go ahead. Lee Sandquist - Credit Suisse Securities (USA) LLC: Hi. Good morning. This is actually Lee on for Julian.

Hi, Lee. Lee Sandquist - Credit Suisse Securities (USA) LLC: Despite the strong improvement in sales and profitability for the year, starting out the year, the guide for slight positive cash flow is unchanged. Can you just talk about the dislocation there?

We see the working capital going up a little bit in line with the increases in our business volumes. And so we just want to remain a little cautious in terms of the free operating cash flow for the year. It will be slightly moderately positive. The capital expenditure also has still a range that we guide to. So, effectively, we intend to land at a moderately positive cash flow. Lee Sandquist - Credit Suisse Securities (USA) LLC: Understood. Unlike last quarter, the monthly sales trends were stable exiting the quarter. Could you just touch on how demand trended through October?

Yeah. We're not going to comment on October at this point. Lee Sandquist - Credit Suisse Securities (USA) LLC: Okay. I'll leave it there. Thank you.

Thanks.

The next question will come from Adam Uhlman of Cleveland Research. Please go ahead.

Hey, everybody. Good morning.

Good morning, Adam.

I guess, first, Jan Kees, on the earnings guidance, could you provide a split of how you're thinking about sales and EBIT performance for each of the segments for the year? The Infrastructure segment's growing really nicely. The margins on both are up a whole bunch. Whatever you could provide there would be helpful.

Yeah. Adam, you know that we don't provide segment disclosure in terms of our, how do you say, guidance for the year. We're looking at this year, and we're seeing for the moment markets that have been firmer than what we expected, as Chris mentioned. And we're going to be playing it conservatively like we've typically done at this company and make sure that we basically delight our customers in terms of the products we sell and the productivity that we bring to them.

Okay. Got you. And then maybe just on the CapEx guidance. We're kind of run rating below the full year target here in the first quarter flat year-over-year. How should we think about the weighting of that through the year? Is that something that accelerates as the year progresses that hit the modernization targets?

Yeah. We're still on track with our spending for the year. So, to catch up, we'll have to ramp up. You shouldn't interpret that we're necessarily behind. That was kind of the planned ramp up anyway. And so, part of my deep dive as you get comfortable with what we've been committed to in terms of the improvement plan, what I'm seeing in terms of our capital expenditure is pretty much consistent with that plan.

Okay. Thank you.

The next question will come from Steven Fisher of UBS. Please go ahead.

Thanks. Good morning.

Good morning, Steve.

I'm wondering if you could just give us some sense to the magnitude of the raw materials increase year-over-year and when you think that headwind can neutralize on a year-over-year basis, if the raw materials prices were to hold at current levels?

Look, Steven, we typically haven't been providing a lot of information because this is competitive information with regards to the raw materials. Typically, tungsten is the most important one. And recently the London Metal Bulletin tungsten prices has come off a little bit of the high that we've seen about a month ago. In terms of the cobalt, which is the distant second raw material component, we've seen prices relatively stable in the high 60s over the last few months, so not really a big change. And then the steel prices – you're probably better positioned to talk about the steel prices than I am, but the steel prices have been relatively flat over the last two, three months.

Do you think maybe your fiscal Q3 you'd have a sort of a neutral impact year-over-year, Q4?

Look, at the end of the day, Steven, we intend to increase prices on the basis of the productivity that we're providing to our customers both on the industrial side as well as on the infrastructure side and Widia obviously. We want to make sure that we add value and we add productivity to our customers, so that the price increases are acceptable to them, right?

Fair enough. And in terms of energy being an outsized grower this quarter, was that the favorable mix you mentioned a number of times? And how should we think about your assumed mix over the next few quarters, particularly with the rig counts flattening?

Yeah. I think – I mean if you remember in the energy market, if you – first of the quarter, prior year quarter, energy was still very much in the tank. So we have such a huge recovery this quarter. We just got to keep in mind we started from a really low point. But as I think we mentioned, rig counts is basically – are substantially up from the prior year quarter, but they've now stabilized. And so we think that that business is still going to be there, but we're not expecting it to continue to grow, but rather stay stable over the next several quarters.

And was the energy the favorable mix that you've been discussing, or was this something else product-oriented?

On Infrastructure, it was really pretty much a product related and I guess that could be partially driven by -

Oil and gas.

By oil and gas.

Okay. Terrific. Thank you.

The next question will come from Andy Casey of Wells Fargo. Please go ahead.

Thank you. Good morning, everybody.

Good morning, Andy.

Good morning. Just a follow-up on the price-cost short-term in Q1, you may have said it. I may have missed it. But was that negative or neutral in Q1?

The question is – could you just repeat the question a second, Andy, please?

Sure. On price-cost for the first quarter, was that – you mentioned negative in Infrastructure. I'm wondering overall was it negative and was it sizable?

I mean we – I think what – quarter-over-quarter prior year raw materials was one of the things that was unfavorable, one of the drivers. And so that's part of the story.

Okay.

That was offset by restructuring was positive and organic sales growth and then as we talked about we had some favorable mix here on balance too.

Okay. Okay. On slide 8, if I back into, it looks like restructuring added roughly $17 million year-over-year. Should we expect about the same benefit in Q2 and then for that to dissipate a little bit in the second half?

Look, we will stop talking about the restructuring programs and the head count reduction programs next quarter. The programs are largely complete. These programs will continue to run on in the background. I'm not saying that we're going to reduce the benefits of those, but the programs has implemented and executed – are largely – have reached their completion. We're now focusing on the conditions and firm market conditions that exist around us. And we will see increasingly as you will hear on the Analyst Day the modernization effect starting to take room (36:57).

Okay. On that modernization, Jan – thank you for the first answer. Did you include any benefit in fiscal 2018 guidance or should we assume the tailwinds are really 2019 and beyond?

Yeah. I think the bulk of those savings are going to start to kick in in 2019.

Okay. Thank you. Thanks for that. And then, lastly, if the current guidance for the last three quarters ends up being conservative, would you look to accelerate CapEx above current plan to accelerate those modernization benefits or would you let that accrue to higher free cash assuming working capital kind of stays where it's currently expected?

Yeah. I think you have to look at the – the modernization program is one that we're trying to accelerate just to reap the benefits sooner, but it's not going to be driven by how much cash we have on in terms of our ability to spend it. So that project is – it's being run as a project and we're trying to keep it on schedule and accelerate it, but it's not really – the fact that we're generating more cash we're going to try to go faster. We just need to do it – we need to do it carefully in the right speed, based on the merits of the project and the benefits we're trying to derive from it.

Okay. Thank you very much.

The next question will come from Ross Gilardi of Bank of America. Please go ahead.

Hey, guys. Just on the price increases, what are you hearing from your Industrial – from your distribution partners? It's clearly – it's a battle for them to raise prices in this environment right now. So their overall receptivity and if you've been able to witness what kind of success they are having passing your own price increases along.

Hey, Ross. This is Chuck. No customer ever thanks you for a price increase but our distributor partners are clearly selling on value just as we do. They're providing productivity to customers. And, frankly, the response from the marketplace has been reasonably positive. We see the ability to pass this through although maybe not 100% through our distributor channel. It is a very high percentage of their ability to pass it through.

Got it. Thanks. And I get what you're saying on the oil and gas side and on the rig count and so forth. Are you actually seeing order intake slow right now or is it kind of on a year-on-year basis or is this just more of an expectation of kind of what's going to come?

Yeah. The way I would think about that is we did see an increase, but we're going to stay at that increased level for a while.

Okay. And then, just lastly on your plant modernization program, so where are you now? I mean have you started to install a lot of the new machines and how is it going from an execution standpoint? Have you experienced any type of production disruption as you bring these things online and incorporate them on the floor?

Yeah. I guess we're in the early stages of starting to commission a number of the machines. But the way we're doing this is we're trying to allow our current production process to operate in parallel and then ramp these up alongside them. So it's a complex project. There's never zero disruption. But I think we've got a good plan in terms of how not to disrupt the supply chain. And so far we're managing that at this point.

Got it. Thanks, guys.

Thanks.

The next question will come from Walter Liptak of Seaport Global. Please go ahead.

Hi. Thanks. Good morning, guys.

Good morning, Walter.

Hi, Walter.

A follow-on to the last one. The markets are recovering pretty nicely. Does that slow some of the CapEx? You can't get the machine automation in place because people are busy with just the process flow within the factories?

No. It doesn't necessarily slow it, I mean, because we're – like I said we're trying to bring these modern processes online in parallel for the most part. So, those capital expenditures are happening sort of independent and what the factory is trying to work on. And then, we're also trying to allow the manufacturing leadership to just continue to focus on meeting the customer commitments and driving the business. We've set up a program management office to try to ramp up and parallel these modernization programs. So, we're not asking key operations people to work on both at the same time because that's a recipe that doesn't always work out very well.

Okay. Got it. Okay. I wanted to ask about the guidance and just kind of your guidance philosophy. The organic revenue growth going up to 5% to 7%, what changed in the rest of fiscal 2018 to get to that because first quarter was a lot stronger organically? Did you change the model for second quarter or the rest of 2018? How are you thinking about the comps for the back half of year?

Yeah. I think, well, the comps are going to get more difficult as we progress throughout the year. But like anything with the sales forecast is – it's a bottoms-up view from all the regions and that process inherently people tend to be a little bit more conservative. They don't want to overpromise. So, we're not – so I think if anything the 5% to 7% is our best view at this point. But I would expect that it's maybe a little conservative, because of the process. And, frankly, having been here just 90 days, I don't have my radar on in terms of the fudge factor that might be inside that number, but my sense is that if anything, it might be a bit conservative, but we'll have to wait and see.

Okay. That sounds great. So, I guess, did you true-up the bottoms-up view after this quarter was over?

That's right.

You did true it up. Okay.

Basically they're a re-forecast. Yeah.

Yeah.

Okay. And then, what operating leverage are you thinking about for the full year? The operating leverage, 68%, was much stronger than it was last quarter. Where you think the business will operate in operating leverage this year?

Typically, the operating leverage for this business sits around 40% to 50% depending on the quarter. We – a little bit different per segment, as you know, but the average is around 40% to 50%. And that is typically what we look at. Obviously, we try to maintain strict control of costs, both on the cost of sales as well as operating expenses to make sure that as much as possible flows through to the bottom line.

Okay. All right. Great. Thank you.

The next question will come from Joel Tiss of BMO Capital Markets. Please go ahead.

Hey, guys. How's it going?

Good morning, Joel.

Good morning, Joel.

I just wonder going in a little bit of a different direction, can you talk a little bit about what's happened to your market share, if there is enough sort of – enough runway that there's been an adjustment. And I just wonder if we can talk a little about the competitors too. Who might be vulnerable? Or as you're connecting with all your customers, what's the feedback? What are you hearing from them about what needs to be done and we're happy to see you back, that kind of stuff? Any color in that direction would be very helpful. Thank you.

Yeah. In terms of market share, I think, it's – we've got several periods of good organic growth. We know we're getting traction on our growth initiatives, but I think it would be too preliminary to say that we're necessarily taking market share. There are some pockets of areas where we have developed new products and targeted new business that we weren't in before. So, clearly, there's a share growth there. But I think, in general, it's too early to tell that we're actually taking market share substantially. And on the competitor side, my basic rule of thumb is I'm not going to really talk about the competitors in a format like this.

And then how about the feedback that you're getting from customers? What do they say, all this is great, we want you to do more of and what are other areas that you might have to readjust?

Yeah. I think our channel strategy and our approach now to partnering with distributors, not only just moving from direct to indirect but just treating these distributors as true partners and being able to grow together, that's been very refreshing to customers and ultimately benefits the end users. So their reaction to Kennametal's new approach under Chuck's leadership and on the Widia side under Alexander has been very positive. What – sorry, there was another piece to that. What was the other piece you said?

No, just whatever sort of negative feedback that you feel like maybe we need to go back and tweak the way that we're going to market or the way that we're approaching some of these different programs?

No, I don't think – there really hasn't been a need to make substantial adjustments because we feel pretty good about how they're working at this point.

That's great. Thank you.

The next question will be a follow-up from Ann Duignan of JPMorgan. Please go ahead.

Yeah. Practice makes perfect. Can you give us a little bit more detail on the partnership with Caterpillar? And are you comfortable that you've adequately, conservatively guided for that business? Anytime anyone goes into partnership with Caterpillar's dealers find some extraordinarily independent and maybe tougher to do business than anticipated. So can you just expand a little bit on the partnership there and how you expect it to progress?

Yeah. I'll let Pete add a little color to this because it's really a great success story, and I'd like to have the opportunity to talk about it. But generally with Caterpillar we don't have a lot of business with Caterpillar. And my feeling is that what we've got in the current forecast is really kind of small in terms of what the total potential could be some day. This is going to take some time to ramp-up. So, I think, this has got a lot more upside than what we're currently contemplating in the longer-term. These things do take time to ramp up. But in terms of what we have in the 2018 numbers, I think, what we have in there is fine. It's not going to be a big driver but this is really something for 2019 and beyond. Anything else you like to add to that?

Yeah. Thank you, Chris. Thank you for the question. We are really excited about the partnership that we've developed with Caterpillar. I would say, as Chris did, it's early to tell as far as how this will develop, particularly in FY 2018. As you said and we have gone through quite a bit of a pilot with them prior to the announcement that gave us a good understanding of what it's like to deal with each of the individual dealers. And, as you said, there are challenges associated with that. But we have set ourselves up from an organization standpoint to support them around the world. Soon after that announcement, we've had quite a large number of dealers contacting us. The value that we bring to the relationship as far as our knowledge of road building and construction and optimizing first of all in terms of Cat (49:26) equipment is something that excites them and us going forward. So, as Chris said, I expect this to develop into a significant contributor in the future.

And just as a quick follow-up. Are you displacing somebody for the dealer also (49:43)?

Caterpillar had a partnership in the past for the consumable tools that we'll be providing to them. Obviously, that relationship has ended and now started with Kennametal. As far as their involvement in this, the supply chain is changing where it's set up material going through the corporate Cat and then being distributed out to the dealers we'll be doing that directly. So that was part of the synergies and efficiencies that will come from us working with them. So we are with each of the dealers shipping direct and working with their individual teams. We have partnered Kennametal employees with each of their dealers to have a joint relationship going forward to customers as far as selling equipment in the consumable as a total package for them.

Okay. I'll leave it there in the interest of time. I'm sure we can get more details at the Analyst Meeting. But thank you. I appreciate the color.

Thank you, Ann.

Thanks.

The next question will come from Steve Barger of KeyBanc Capital Markets. Please go ahead.

Hi. Good morning.

Good morning.

Good morning, Steve.

Chris, just thinking about the portfolio of products and the physical footprint, anything you need to add or subtract to further optimize in the near-term?

No, nothing, nothing in the near-term and I'm not even sure there's anything in the long-term. But, frankly, after 90 days that wasn't where my priority was. But, as I look at the business now, I wouldn't change anything in the short-term for sure.

Got it. And, Chuck, you talked about the 90% hit rate transitioning customers you approach, so obviously successful. What is the sticking point for the 10%, just any comments on how the efforts have evolved based on lessons learned?

Sure. We've said from the beginning this would be the end user's decision on the best value they see from any particular supply chain and we've really followed that rule. If we provide more value going direct then that end user is very welcome to stay direct. The 90% is – most end users see the value our distributor partners bring, our integrators bring to the supply chain and have chosen the switch. Long-term, I don't see that changing. We do have some customers that truly believes service by Kennametal direct is the best supply chain for them and we're going to continue to service them that way. And the bulk of end users they see the value our distributors bring, I believe will continue to switch to that supply chain.

And just one follow-up. Any change to how you're seeing e-commerce as part of your strategy, whether it's via the distributor partners or through your own efforts?

Yeah. Steve, all three businesses are looking at a digital experience improvement from the Kennametal side. We've had some pilots with a few more e-focused sellers. And I would say the support from the Kennametal side is there. The success rate hasn't probably been as great as we had hoped, but we're continuing to play in this area, investigate up new and alternative supply chains to get our products to end users however they'd like to buy.

The success rate not as great as hoped just because it's hard to get the customers to adopt it or what's been the sticking point?

These are new channels and we learn every time we try to set up a new program with a new access to the market. I didn't mean to say they were unsuccessful. They just have had mixed results.

Understood. Thanks.

And, ladies and gentlemen, this will conclude the question-and-answer session. I would like to turn the conference back to Chris Rossi for his closing remarks.

Thank you, everyone, for your ongoing interest in Kennametal. I look forward to meeting many of you over the next coming months. Please follow up with any questions you might have with Kelly. Thank you very much.

Thanks, everybody.

Thank you.