Next up, we have Graco. Graco manufactures highly engineered fluid handling equipment that measures, mixes, controls, dispenses, and sprays fluids for construction and industrial markets worldwide. Joining us today from Graco and braving the winter storms out in Minneapolis and most of the Midwest, very appreciative to have CFO David Lowe and Director of Corporate Treasury and Investor Relations, Chris Knutson. David was named CFO in June 2021 after previously holding leadership roles as President of the Worldwide Process Division and President of Worldwide Industrial Products Division. He first joined the company in 1995 as Treasurer. Chris was named Director of Corporate Treasury and Investor Relations in 2020 after previously holding financial positions, including Regional Controller for Asia Pacific and Director of Treasury and Regional Controller for South and Central America. He first joined Graco in 2008 after nearly seven years as an audit manager at PwC. Graco has 167 million shares outstanding. The stock trades around $70, $11.7 billion market cap, $243 million of net cash, $11.5 billion total enterprise value. David and Chris, thanks again so much for being here. I'll turn it over to you for the next slide. Are founded on the technology. It's just a short presentation. We've left most of our time for Q&A. All right? So Graco is a 100-year-old company. It was founded in Minneapolis in 1926. It's been a public company for quite a few years now. We went public in 1969. We've grown to approximately 4,000 employees. We had revenue last year exceeding $2 billion. And we are a global company. We have a large footprint around the world. But I should point out more than 80% of our manufacturing is still here in the United States. We report our results through three segments. The first one's industrial. We serve a number of large and very visible industrial markets. The reasons why they buy our equipment or competitive equipment have to do with important trends in the factory around automation and electrification and material changes and such. We compete in this space against a group of very credible public companies that are probably known to most of you. The process markets are really quite similar to the industrial markets. We sell into many, many, many different industries. Same kinds of drivers. These factories, these operations are always striving to improve their efficiency, improve their technology and environmental footprint. And we see in this space some very, very visible industrial companies. The contractor segment, which is our largest segment, sells to a wide variety of paint, coatings, and foam contractors serving residential, non-residential markets, remodeling markets, infrastructure markets, striping markets, a wide variety of businesses. And here we compete against, I'd say, a couple of visible competitors. And this is one area where we do compete with some smaller startup companies in markets like China. What I should point out is while we report in these three segments, Graco is really a combination of (can't even agree on the number) 15-18 niche markets, and those are markets that have separate product plans, separate channel strategies, separate managements, but we're all, for the most part, striving to do the right thing in terms of how we view Graco's competencies and what we can bring to our businesses, which is, we hope, superior technology and innovation solutions, high-quality, durable products because our products are used in business-to-business environments, and give the customer a good enough experience that they come back again and again. There aren't many secrets in these niche industrial businesses that we're in, but one of them is the installed base is very, very large in most of these businesses. And if you can cultivate that space and keep those customers happy, it's a good source of business for a long time to come. Terrific. Thanks so much for that introduction, David. Again, if anyone in the room would like to ask a question, please just raise your hand, and then if you're participating on webcast, you can just enter your question on the bottom of the Q&A box on your Zoom screen. You mentioned Graco's U.S. manufacturing base differentiates the company and haven't exactly been true for the broader U.S. industrial base, as you see some of your larger end customers starting to reshore plants back to the U.S. Can you talk about some of the specific product lines within your industrial and process segments you expect to benefit and some of the key end markets driving that? Okay. Well, thank you. Thank you for that question. Whenever there is, I would say, industrial development in any part of the world, it represents an opportunity for us. And if you think about the history of the last 20, 25 years, the opportunities that emerged in Asia over that period of time created situations where most of the Graco product lines could develop markets and grow and have critical mass in countries like China and India and some places where up until maybe the turn of the century, really the only significant market for us was Japan. So the opportunity in what they call reshoring is, I'd say, a good one for our business because the major, I'd say, the major product families or application groups in our jargon that we sell, if manufacturers bring their paint line operations back to the U.S., that's good news for our liquid and our powder businesses. If they bring their other assembly operations back to the U.S., that can be good news for our sealant and adhesives applications. Process manufacturers, again, many, many different industries, good news for our transfer equipment and such. So I would say that it's an opportunity. Now, it will take. This doesn't play out in quarters. This plays out in years. As manufacturers, especially the larger ones, think about bringing their manufacturing operations back here, they also have to build vendor networks again because a lot of them moved away and moved away a long time ago. Frankly, a lot of their vendor networks got hollowed out. That's why it's not something that even a manufacturer that's willing to be aggressive (this won't be a 2023 story or even a 2024 story) but I think it's something that we'll see play out over the next seven to 10 years. Overall, it's positive. Perfect, and maybe specifically within the semiconductor market, can you talk about some of the applications that Graco serves there and any incremental benefit you expect over the multi-year time period from the CHIPS and Science Act? Yeah. I'll take that one. So when we start talking about the semiconductor side, it's a business that we're relatively new in. We acquired a company called White Knight in 2015, and that was our entrance into this market. These pumps that we have there are made from very difficult. It's used in difficult applications, and it's clean room technology. So they are Teflon-based pumps that are used in the manufacturing. And it's to pump the ultra-pure liquid that they use when they're creating these wafers and the chips. Some of the markets that we actually are in is they're in the fabrication of the semiconductors, but also in solar panels, LEDs, flat panel displays, etc. And in these, you're pumping this alkaline and corrosive and toxic chemicals that are used there. And as far as going with the CHIPS Act, yes, we should see some incremental benefit there. But please remember that our product is typically at the end of the cycle. So it's not something that we will get immediately. And as David said, with the reshoring, it's something that plays out over an extended period of time. And you've recently talked about some of these newer end markets that Graco has been able to penetrate and establish a growth position in. Can you discuss what you're seeing in battery manufacturing and solar, which you mentioned, Chris, and e-mobility? Yeah. These are really exciting spaces for us. We've had product categories that have served some of these markets in similar applications in the past, but we are seeing a big ramp up here. And it's an area where we've increased our investment towards by locating some of our engineering teams closer to where these products are manufactured. We've opened a technology center and an innovation center in South China. A lot of people ask, "Why would you put it in South China where we have a footprint in Shanghai?" Well, there's a lot of the manufacturing of the electronics. There's development in the EV markets with companies like BYD and CATL that are in South China. So we wanted to put our engineering teams closer to where the actual products were being made and where we could be in close contact with them. So we put a facility there. We also have an engineering and innovation center in Aachen, Germany. Again, we want to be closer to where all of this investment is made, and with these products, there are very specific applications, and what is needed is something that is very precise and accurate. When you're beading in a small space and you have a very expensive fluid that you're using, you have to have something that is very precise, it's very accurate, and it's something that's reliable and of high quality, so they come to us and look for those solutions, and as far as the battery manufacturing goes, we've always had a lot of products in this space for the bonding of batteries, potting of batteries, which is protecting the critical components, but also encapsulating the battery. The last thing you want with your EV vehicle is for a fire to break out. So if you could put some sort of fire retardant over that battery to give you at least a little bit of time to exit in case there is a fire, it's equipment that we've had and that we're selling within this space. I would just add, I think Chris has got absolutely correct, is that I think what makes some of these new areas interesting to us is this is the first time with the rise of the electric vehicle industry. We've been selling to automotive for 80 years. But this is the first time we can actually participate in the processes around the drivetrain, and so that is one of the things that makes it, I would say, exciting in our little world. Another thing that has been an interesting development over the last couple, three years that we have seen that we're trying to take into account. One of the reasons why we've been perhaps a little more aggressive than average on the investments we've made is that up until maybe COVID hit, when we were talking about electric vehicles, we were talking about the electric vehicle players that we're thinking of that that's their focus, the Teslas and the BMWs and some of these folks. What we've seen, of course, what you've seen over the last three years is the legacy traditional car companies have really dramatically shifted their focus in terms of how they're thinking about electric vehicles and how quickly they want to move their product lines to that technology. One thing I know from firsthand experience about serving the automotive industry is, yes, there's upgrades. Yes, there's maintenance investments. But what really drives investments in our world in paint lines, in body shops, and other things are new product platforms. So when they're talking about new product platforms and big, big shifts into their portfolio over the next decade, everything else being equal, that should represent a good opportunity for us. Excellent. And I guess moving beyond solar, are there other areas of new energy as well as traditional energy applications? Can you talk about the portions that Graco plays in and project activity you see across those buckets going forward? I would say from the traditional energy side, it's less of our business than it has been in the past. I would say that it's probably 2%-3% since we did the divestiture of Alco back in 2020. It's been less of a focus for us. We do have some other products and some other new energy outside of EV within some of our other applications, but it's relatively small at this point. Okay. And now moving over to c ontractor, which is the largest business at Graco now, sticking with the theme of fiscal support, can you talk about the product lines within contractor that should benefit from the U.S. IIJA bill? Yeah. We talk a lot about the IIJA bill, and for us, when you think about those products, I think we have some good products that relate to line striping. You think about anything that happens on the roads in factories, municipalities, within airports; everything has the lines on it, so it needs that type of equipment, as well as pavement maintenance, which is removing and replacing all the lines, so we should be good there. Another piece of our business is on high-pressure protective coatings, so any applications that arise from adding bridges or any type of infrastructure; you have more wind applications. Anything that is subject to climate and weather and corrosion and just traditional breakdown, we have pieces of equipment that can put a layer over it to protect it, so all of that would add to our business. The magnitude is something that's always difficult to quantify for us. Again, our product is at the end of the cycle. So we typically don't see anything until the very end of a project. But at the same time, how much is going to be spent? Will there be additional investment by our distributors and by our end users in new equipment? We tend to think that as they're busy and they have projects, that they tend to spend on equipment. So we think that it will be good, but it's just tough for us to overall quantify what the impact would be. Absolutely. And maybe looking at the rest of the contractor business, I believe Mark was recently at an event interacting with a number of kind of your end contractors. What's general sentiment, I guess, across the commercial construction markets and maybe the repair and remodel side, like the residential? That's a timely question for the business. I would say that the contractors that have a meaningful focus on commercial, they tell us they have pretty good order books. In some cases, some of them are even talking about activity and plan programs outgoing in the next year. It suggests that on the commercial side, probably if you're not in the office space, that isn't exactly the greatest space to be in. I would say generally, they tell us that it is going to be a good year. Residential, I would say that you've got to slice it through. Certainly, in the case of single-family housing, what do we know? We do know it's going to be a down year in terms of residential construction. It doesn't mean that contractors aren't going to be busy because I think that we have convinced ourselves anyway that starts can be in the 1.2 or 1.3 million space instead of 1.4 or 1.5, and that's going to be okay for us because contractors are going to have activities. They're going to be buying equipment. They're going to be buying spare parts. We're not foreseeing an environment in 2007, 2008, 2009 when we were, I think, at the low something. I think briefly we were under 500,000. That's not what we're talking about here. But we remain, I would say, cautiously optimistic as they say. In the multifamily space, one of the interesting factoids. I'm going to give you two factoids that I'm not sure they make my case, but they sound good. One is in the multifamily housing space. This year, there will be the highest level of unit construction since 1974. When you think about that, I mean, some families, how you guys do it on the East Coast here, I have no idea, but people have to opt into apartments and so forth because they can't quite handle the investment in the house yet, and I think that's a phenomenon we're seeing around the country and certainly in the more expensive places, even a little bit implied over country, so that's good for us because when you get into multifamily, you're talking about jobs that are certainly professionally done, and five units, 10 units, 20 units, 100 units, you need high-powered sprayers to do that, so that's good in the Graco world. The other thing is the remodel, and there's a back and forth about what remodeling should be like. Obviously, we saw a lot of activity for three years in the COVID, post-COVID. As our departed CEO used to say, "People aren't working at home. They're working on their home." And so the DIY business was very strong. And it's been three years into it, and we are seeing - we are seeing in the home centers less foot traffic and so forth. But I can't remember which home center CEO it was, but not long ago, one of them said something that resonated, is that what drives investments in remodeling and repaint is the age of your property. Because painting is one of the really cheapest things you can do to sort of at least enhance - and I won't say necessarily improve value, but maintain value. And of course, houses, for most of us, it's our largest single investment. There is an interest in that for homeowners, even if they're not intending this year or next year on moving because they're locked into 3% and 4% mortgages. They don't want to move into a 7% mortgage. However, this CEO said, "Back at the turn of the century, the average age of a U.S. residential property was 28 years. Currently, it's 40." And his premise is, of course, when you've got property that old, there's a whole lot of stuff to be remodeled and renovated. So we'll see if it bears out, but that's my story. Excellent. That was very thorough. If we move outside the U.S., North America, Graco has a long-standing commitment to emerging markets. Can you talk about some of the applications and regions you're seeing the most robust activity there? Yeah. We continue to see good activity outside of the U.S. Areas that we focus on: South America, Southeast Asia, India. Typically, what we see in those areas as the best markets for us are things related to automotive production. You're going to see some general industrial business, lesser so for the contractor side, primarily because these emerging markets typically have low labor rates. They tend to throw a brush and roller towards painting projects rather than a piece of automated equipment. But we also see this as a good opportunity for us to build awareness in those markets and build that product from the ground up and get people seeing the benefits and the return that they're going to get from using a piece of spray equipment versus using the traditional brush and roller. But one common theme in all of these emerging areas is automation. Where can we bring automated pieces of equipment there? Where can we transform manufacturing processes? Great. I think that leads into my next question, which, David, you'd mentioned the investments Graco has been making and is expected to continue to make this year internally. Could you lay out the major buckets of growth CapEx or capacity CapEx expected this year? Okay. I guess a little bit of background. We've actually been on a major capital expenditure program for the last, I'd say, last five years. We're probably two-thirds our way through the cycle. We made a big investment beginning in 2018, 2019 in our large contractor facility, which is in a suburb of Minneapolis. I'd like to claim that we were wise and we had this great predictive ability. We were lucky. We got this done just before COVID hit. We were able, over the ensuing two years, to, I would say, cope with the sharp increase in demand of the business that we wouldn't have been able to have done if we hadn't had that. What we do when we look at our businesses is we try to make, I'll call it, footprint plans, looking ahead, let's say, a decade, 12 years, 15 years on the long side. When you look at our business, I'd say prior to 2020, so getting back to a traditional pricing environment, this is real simplistic, but this is how we think. This is how I think. Our organic growth rate's been 6%. If you say over the last 20 years, you've realized about 2%, our growth rate's around 4% in real. Of course, we serve cyclical markets, so there's some variability there. If you do, you can do the math in your head. We grow at 4%, but say on average, and we're looking ahead a decade or 12 years. You're talking about footprint expansion if you're getting close to capacity of about 50%. So we take a number. I'm being a little simplistic here, but you get the idea. We take that concept, and then we have been rolling it out in our different, again, our terminology, application groups. And so, in 2022, we opened a facility in another suburb nearby, the contractor facility, that has manufacturing growth capacity for our process transfer equipment, our process business, diaphragm pumps, to those of you that have spent time in the pump sphere. Also, our high-performance coatings and foam business, where we have, over the last decade, seen really good growth. That's the protective coatings equipment for the bridges and the water towers and such. It's also a foam insulation business. We're making similar plans to expand our manufacturing capacity in our powder equipment business, which I should add was an acquisition that we were able to talk the FTC into letting us keep a decade ago, and that business is located in Europe and in Switzerland under the Gema name. That business is now doing two expansions, one in its headquarters location in Switzerland, low-cost manufacturing, and another in a satellite operation in Romania that we invested in about seven or eight years ago, and then finally, our original business, as our first slides showed, is our lubrication business, real glamorous, exciting market, and we operate out of another Minneapolis suburb and have announced plans just recently that we will be expanding that capacity pretty significantly in the 23, 24 timeframe, so these are relatively big buckets. I should also add we just completed an expansion to our Sioux Falls spray gun operation. We do get out of Minnesota once in a while, and I would say with these footprint investments taken care of, we never say never, and we don't know what might be coming along on the M&A side, but I think it pretty much cinches up at least our capacity investment space requirements for the rest of the decade, or I should add, sometimes people get all excited, "Oh my gosh, you fit out a factory and you gear it up for business you don't have." I should add, no. We make sure we've got the space and the infrastructure, but the Graco model is one around return on investment, and every time we try, every time we make a capital investment, we strive to validate it on what we call a hard ROI. Not strategic stuff, not soft savings, not what we would call pie in the sky, but hard ROIs. Just like our customers make their decisions on hard ROIs, saving labor, saving materials, having a friendlier environmental footprint, and avoiding some costs that way, whatever it is. So when we fill up that new facility with machine investments, manufacturing equipment, automated equipment, and such, each one of those investments will be justified on a hard ROI basis as we go. So we'll have the space, if you will, the floor plan to make the investments, but we're still going to justify the investments, what I would call the old-fashioned way. Yeah. I know we run out of time, and I'll catch Chris and David later, and thank you very much, and thank you for not bringing the Minneapolis weather here today. Okay. It's our pleasure. Thank you very much. We really enjoyed the program. Thanks, David, Chris.