Good morning. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the ITW fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. For those participating in the Q&A, you will have an opportunity to ask one question and, if needed, one follow-up question. Thank you. Karen Fletcher, Vice President of Investor Relations, you may begin your conference. Thank you, Cheryl. Good morning, welcome to ITW's fourth quarter 2022 conference call. I'm joined by our Chairman and CEO, Scott Santi, and Senior Vice President and CFO, Michael M. Larsen. During today's call, we will discuss ITW's fourth quarter and full year 2022 financial results and provide guidance for full year 2023. Slide two is a reminder that this presentation contains forward-looking statements. We refer you to the company's 2021 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations. This presentation uses certain non-GAAP measures, a reconciliation of those measures to the most directly comparable GAAP measures is contained in the press release. Please turn to Slide three, it's now my pleasure to turn the call over to our Chairman and CEO, Scott Santi. Thanks, Karen. Good morning, everyone. As you saw from our release this morning, in Q4, we delivered a strong finish to a year of high-quality execution in the face of some pretty unique challenges in the operating environment. Starting with the top line, organic growth was 12% as all segments delivered positive organic growth, and five of our seven segments grew double digits, led by Auto OEM up 20%, Food Equipment up 17%, Welding up 15%, Polymers & Fluids up 11%, and Test & Measurement and Electronics up 10%. Construction Products was up 4%, and Specialty Products was up 3%. Operating margin expanded 210 basis points to 24.8%, with 110 basis point contribution from enterprise initiatives and favorable price/cost margin impact of 70 basis points, which was favorable for the first time in nine quarters. Incremental margin was 52%, and operating income grew 18%. GAAP earnings per share increased 53% to a record $2.95, including $0.61 of gains from divestitures and $0.12 of negative currency. Excluding $0.61 of divestiture gains and $0.12 of negative currency, EPS growth was 27%. For all of 2022, the company delivered organic growth of 12% for the second year in a row, best-in-class operating margin of 24.4% in our base business, after-tax return on invested capital of 29.1%, and record GAAP EPS of $9.77, an increase of 15% versus the prior year. There's no question that our decision to stay invested in our enterprise strategy and in our people throughout the pandemic and the quality of our team's execution of our Win the Recovery focus coming out of it are powering the strong growth and financial performance ITW is currently delivering. As a result, we are very pleased with our momentum and positioning heading into 2023. Turning to our 2023 guidance, demand remains solid across the majority of our portfolio. We are seeing meaningful improvements in supply chain performance and moderating input cost inflation. At the same time, there's no question that the economic outlook, let's call it, remains certainly dynamic. As a result, our organic growth projection for 2023 of 3%-5% and our EPS guidance of $9.60 at the midpoint reflect current levels of demand and a risk adjustment for further slowing in certain end markets. Michael will provide more detail on that in just a minute. Before I turn it over to Michael, I want to again thank my ITW colleagues around the world for their extraordinary dedication and commitment to serving our customers and executing our strategy with excellence. Michael, over to you. Thank you, Scott, good morning, everyone. The demand growth that we've experienced all year continued into the fourth quarter as revenue grew 8% with organic growth of 12%. On an equal days basis, organic growth was 14%, as the fourth quarter this year had one less shipping day compared to prior year. We finished the year with strong growth momentum, as evidenced by our sequential organic revenue growth of +4% from Q3 into Q4 on a sales per day basis as compared to our historical sequential of +2%. By geography, every major region grew double-digit, with North America up 13%, Europe up 11%, and China up 10%. Foreign currency translation headwind reduced revenue by 5%, and the net impact from acquisitions and divestitures was +1%. GAAP EPS grew 53% to $2.95, and included a $0.61 gain from two divestitures, which I'll provide more detail on in a moment. Excluding those gains, EPS increased 21% to $2.34, which included $0.12 of EPS headwind from foreign currency translation. On an apples-to-apples basis, eliminating both divestiture gains and currency headwind, EPS increased 27%. On the bottom line, operating income grew 18% with strong incremental margin performance of 52%, and operating margin improved 210 basis points to 24.8%. Operating margin in our base businesses, excluding MTS, was 25.2%. In the fourth quarter, we achieved favorable price/cost margin impact of 70 basis points. As Scott said, this was the first quarter with favorable margin impact from price/cost since the third quarter of 2020. Enterprise initiatives contributed 110 basis points. As you saw in the press release, we completed two divestitures in the fourth quarter, resulting in a combined pre-tax gain on sale of $197 million recorded in non-operating income, and an EPS impact of $0.61. By utilizing capital loss carryforwards to offset taxes on the divestiture gains, the overall tax rate for the company was 19.1%. Overall for Q4, excellent operational execution across the board, strong financial performance in what remains a pretty uncertain and volatile environment. Please turn to slide four, starting with our progress on organic growth. As you know, we've been aggressively executing a very focused growth strategy to build consistent above market organic growth into a core ITW strength on par with our operational 80/20 Front-to-Back capabilities. As you can see from the data on the left side of the slide, ITW's 12% organic growth rate for each of the last two years compares favorably to our proxy peers at about 9% both years. Suggesting that while we're not there yet in terms of realizing ITW's Full Potential organic growth performance, we're making some very solid progress. Moving on to the segment results, starting with Automotive OEM, which led the way with organic growth of 20%. Year-on-year revenue growth was of course helped by supply chain challenges in the industry last year. North America was up 15%, and Europe grew 23%. China was up 17%, with particularly strong growth in electric vehicles. On a full year basis, ITW Automotive OEM revenues were up 12% versus 6% growth in car builds. Looking forward, we expect Automotive OEM to grow 5%-7% in 2023 based on a risk-adjusted auto build assumption in the low single digits, plus our typical penetration gains of 2%-3%. Turning to slide five, Food Equipment delivered another very strong quarter with organic growth of 17%. North America grew 25% with double-digit growth in all major categories and end markets. Institutional was up more than 40% with strength across the board. Restaurants were up 30%, and retail grew 20%. International revenue grew 7%, with Europe up 9%, and Asia Pacific was flat with some near term softness in China. The Food Equipment team also delivered excellent progress on margins with Q4 operating margin of 27.6%, an increase of almost 500 basis points year-over-year. Obviously strong momentum in this segment, and we expect Food Equipment to grow 8%-10% in 2023. Test & Measurement and Electronics revenue grew 15% with organic growth of 10%. Test & Measurement grew 12% organic, excluding the acquisition of MTS, with continued strong demand for capital equipment as evidenced by Instron, which grew 24%. Electronics was up 7%. While our semi-related businesses, which represent combined annual revenues of about $550 million or approximately 20% of the segment, grew 17% in the quarter, we are beginning to see a slowdown in demand after three years of very strong growth. Embedded in our 2023 organic growth projection of 2%-4% for this segment is anticipated further slowing in semi-related end markets. Moving on to slide six. Welding delivered strong organic growth of 15% in Q4, with equipment up 17% and consumables up 13%. Industrial sales remain very strong with organic growth of 25%. On the commercial side, which is more consumer-oriented, demand continued to slow and organic growth was down 1%. On a geographic basis, North America grew 15%, and international grew 17%, driven by strength in the oil and gas business up 19%. Operating margin was up 160 basis points to 31.6%, a new record for the segment and for the company. Looking forward, we expect Welding to grow 5%-7% in 2023, which includes some anticipated further slowing on the commercial welding side. Polymers & Fluids delivered organic growth of 11%, with the automotive aftermarket business up 13%, with some seasonal strength in wiper blades. Polymers grew 11% with continued strength in industrial applications, and Fluids was up 5%. North America grew 11%, and international was up 10%. Looking forward, we expect Polymers & Fluids to grow 3%-5% in 2023, which is based on current levels of demand and anticipated further slowing in the more consumer-oriented automotive aftermarket business. Turning to slide seven, overall demand in construction slowed to an organic growth rate of +4%. North America was still up 9%, with residential up 11% and commercial construction was down 6% due to a tough comparison of +21% last year. Europe was up 3%. Australia/New Zealand was down 4%. As you know, construction is our most interest rate sensitive segment. We are projecting further slowing in 2023 and a negative organic growth rate of -5% to -3%. Specialty organic growth was 3% as supply chain shortages eased up in Q4 and the equipment businesses had a strong finish to the year with organic growth of 8%. Consumables were up 2%, and on a geographic basis, North America grew 1% and international grew 7%. Looking forward, we expect Specialty Products organic revenue of -1% to +1% in 2023, which is based on current levels of demand and anticipated further slowing in the appliance components business. Let's turn to slide eight for a recap of a very strong 2022. Throughout the year, our teams around the world did an exceptional job of delivering for our customers by responding quickly and decisively to rapidly rising input costs, navigating supply chain disruptions, and aggressively executing our Win the Recovery strategy. As a result, for the full year, ITW grew organic revenue by 12% with double-digit growth in five of seven segments. Despite significant price/cost margin pressures, and thanks in part to 90 basis points contribution from our enterprise initiatives, our base businesses expanded operating margin by 30 basis points to 24.4%. GAAP EPS of $9.77 was a record for ITW with EPS growth of 15% on top of 28% EPS growth in 2021. Excluding divestiture gains and negative currency translation impact, EPS grew 12% in 2022 on an apples-to-apples basis. In 2022, we also invested more than $700 million to accelerate organic growth and to sustain productivity in our highly profitable core businesses, raised our dividend 7%, marking the 59th year of consecutive increases, returned $3.3 billion to shareholders in the form of dividends and share repurchases, and made solid progress on the integration of a very high quality acquisition in the MTS Test & Simulation business. Most importantly, we delivered these results while continuing to make meaningful progress on our path to ITW's Full Potential through the execution of our long-term enterprise strategy. Let's move to slide nine for an update on our full year 2023 guidance. While we certainly see some positives in terms of supply chains easing and moderating input cost inflation, there's also no doubt that the economic outlook and demand picture is becoming increasingly uncertain. On our last Q3 earnings call, we pointed to pockets of slowing demand in approximately 20% of our business portfolio, and today we would add semiconductor-related end markets to the mix, bringing the total to about 25% of ITW's portfolio. In our view, it therefore made sense to take a more cautious approach to our top-line guidance this year by basing it not just on current levels of demand adjusted for seasonality as we typically do, but rather anticipating further slowing in end markets related to construction, commercial welding, auto aftermarket, appliances, and semiconductor. As a result, our organic growth rate projection for 2023 of 3%-5% is lower than our typical run rate approach. Operating margin is expected to improve by 100 basis points or more to a range of 24.5%-25.5%. This includes approximately 100 basis points contribution from enterprise initiatives and positive price/cost margin impact based on all known and implemented price and cost actions. After-tax return on invested capital should improve to 30%+, and we expect strong free cash flow with conversion greater than net income. For 2023, we expect GAAP EPS in the range of $9.40-$9.80, which also includes $0.15-$0.20 of higher interest expense on our short-term debt and $0.25 of increased income tax expense as our tax rate will revert to our normal approximately 24% versus 22% in 2022, excluding the tax impacts from our divestitures. In terms of cadence for the year, we're now back to our typical first half, second half EPS split of 49% and 51%. Our capital allocation plans for 2023 are consistent with our long-standing disciplined capital allocation framework. Our top priority remains internal investments to support our organic growth initiatives and sustain our highly profitable core businesses. The second priority is an attractive dividend that grows in line with earnings over time, which remains a critical component of ITW's total shareholder return model. Third, selective high quality acquisitions such as MTS that enhance ITW's long-term profitable growth potential and have significant margin improvement potential from the application of our proprietary 80/20 Front-to-Back methodology and can generate acceptable risk-adjusted returns on our shareholders' capital.Finally, surplus capital will be allocated to an active share repurchase program, and we expect to buy back approximately $1.5 billion of our own shares in 2023. Turning to our last slide 10, for our 2023 organic growth projections by segment. You can see that we're expecting solid, mid to high single-digit organic growth in four of our seven segments, offsetting some lower growth rates in Test & Measurement and Electronics, which is due to semiconductor demand, as well as in Construction and Specialty, resulting in an overall organic growth rate at the enterprise level of 3% - 5%, which is on top of 12% organic growth in each of the last two years. We're heading into 2023 with strong momentum, and we're very well-positioned to continue to outperform in whatever economic conditions emerge as we move through 2023. With that, Karen, I'll turn it back to you. Okay. Thank you, Michael. Cheryl, please open up the lines for questions. At this time, I would like to remind everyone in order to ask a question, press star then one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question is from Jamie Cook of Credit Suisse. Your line is open. Good morning, and congrats on a nice quarter. You know, I guess my first question, you know, you talked about the 25% of your portfolio where, you know, you're starting to see weakness. Can you talk, I know semi's the incremental. Can you just give a little more color on what you're seeing in semi? On the 75% of the rest of your portfolio, are trends in line with your expectations a little more positive or negative versus last quarter? I guess just my follow-up question to that, price/cost in the quarter, I think it was 70 basis points positive, I think that's a little better than what you were expected. Was that driven more by price or raw going down? What are your assumptions on the ability to hold price in 2023? Thank you. Okay. That was a, that was a lot there, Jamie. I'll do my best, okay? I think the color on semi is really the, you know, we're coming off a three-year very strong growth cycle with, you know, growth in the high teens or better than that over those three years. We're starting to see a slowdown in the order intake really in Q4. It hasn't really showed up in our numbers in a meaningful way yet, but we do expect that to continue into 2023. We think it's more of a near-term slowdown. Like you said, that is the addition to the portfolio we've said before. 20% is slowing. Demand is slowing. Now it's 25%, and semi is really the incremental 5% this quarter. It's important to keep in mind that the balance, the other 75% of the portfolio continues to perform at a really high level. I'll just point to the, you know, the 12% organic we put up in Q4 and for the full year. Then if you look at our guidance on slide 10, you know, by segment, you can see mid to high single-digit growth in Automotive OEM, Food Equipment, Welding, mid single digit in Polymers & Fluids, then a little bit lower in Test & Measurement. Then, of course, you know, Construction is the one that's a little bit, you know, projected to be down year-over-year and Specialty about flat. I'll also say if you just look at, you know, from Q3 to Q4, we typically, our sales per day go up, you know, 2%. We actually went up 4%. We're more than offsetting, you know, some of the slowing that we're seeing in 25% of the portfolio. Good momentum, really well positioned going into next year. I think on the price/cost side, we were really encouraged. We talked about this on the last call, and an expectation of being positive, slightly positive on margins on price/cost in Q4. This was a little bit better driven by both sides of the equation, really price and cost. It was certainly great to see that turn positive for the first time since, I think I said the third quarter of 2020. The first time in eight quarters. Really encouraging heading into 2023. Thank you. Thank you. Your next question comes from the line of Scott Davis of Melius Research. Your line is open. Hey, good morning, Scott, Michael, and Karen. Congrats on another strong year in 2022. Thank you. Thank you. A little bit of a nit, on the 3%-5% 2023 top line for growth forecast, is there any real price in that or your anniversary, the big price increases that you had in Welding and now you're kind of more in the kind of neutral-ish to maybe slightly positive versus a bigger number? Well, I think we are certainly lapping some bigger price numbers. There's no doubt about that. I think, as you know, we don't break out price and volume separately for all the reasons we've talked about in the past. There's both price and volume in the numbers that we've laid out for 2023. The 3%-5% organic, I'll just say, is a risk-adjusted number. If you do pure run rate, you end up at a higher number. We just thought given everything we talked about, it was probably reasonable to take a more cautious approach, given the given the environment. Yeah. No, it totally makes sense. What about the inflation assumptions in general? When you guys think about the 2023 outlook as far as kind of breaking out materials versus labor and is it fair to assume that labor inflation remains reasonably high, but material inflation is more moderated? Is that a fair assumption in your guide? Yeah, I think that's reasonable. I think certainly, materials and components in that order, we are seeing costs are coming down in a significant way, and they're remaining at a fairly elevated level. I think on our labor costs, certainly we're experiencing the same labor cost inflation as others. Maybe a little bit higher than typical, but nothing really that significant. We're still expanding margins by 100 basis points or better here in 2023. Hopefully that answers your question. Yeah, it does. Thank you, and best of luck this year. Sure. Thank you, Scott. Your next question comes from the line of Tami Zakaria of JP Morgan. Your line is open. Hi. Good morning. Congrats on the great results. I have a couple of quick ones. The first one is, how should we think about your EBIT margin progression throughout the year? Is the 24.5% - 25.5% range going to be fairly consistent in all the quarters? Tami, like I said, we're kind of back to our typical cadence here. I think we said first half, 49% of our EPS for the full year, second half 51%. We really, if you go back and look in time, we've been remarkably consistent. Embedded in that is also the fact that Q1 is typically our lowest quarter in terms of revenue. And, you know, we're expecting somewhere in the, you know, mid-single-digit type growth. Margins will probably start out a little bit lower, but still 100 basis points of margin improvement on a year-over-year basis. And, maybe just to give an additional data point, if you run the same data on Q1 contribution to EPS overall, it's somewhere around 23% of the full year, and that's a pretty... You know, the company has become remarkably predictable over the years, and so I think that's probably a pretty good estimate for how the first quarter might play out. Got it. That's fantastic color. Thank you. Sure. I'm just going to ask the question and hope I get lucky and get a number. Can you share what organic growth is trending quarter to date? Any segments trending negative right now? We just saw the January numbers, and everything looks fine. Everything is tracking and, really nothing different from what we talked about in the script here. We're off to, the start that we thought we would have. Okay, awesome. Thank you. Sure. Thank you. Your next question comes from the line of Andy Kaplowitz of Citigroup. Please, your line is open. Good morning, everyone. Hey, Andy. Michael, when we think about margin expectations for 2023 across your segments, does the lag in price versus cost flip the most in auto OEM, so you could see a nice jump in margin in that segment? Should we generally think that your segment margin will trend with who has the highest growth forecast versus the weakest growth forecast in 2023? I think, Andy, we expect, you know, all of our planning here at ITW is done, bottoms up, as I think you know. Every one of our segments, including the higher margin ones, such as Welding, as well as automotive, which is really dealing with some near term pressures primarily related to price/cost, as well as just, you know, volume leverage. Every one of our seven segments told us that they expect to improve margins year-over-year in 2023. Obviously the ones that have the higher growth rates, you know, are gonna have more volume leverage and therefore probably a more significant improvement in operating margin. Everybody will get better. I would just say on automotive, you know, it's gonna take some time to recover, the price/cost margin impact, which has been significantly higher in automotive than in other segments for all the reasons we've talked about in the past. It takes a little bit longer to recover price. I think, you know, our current view is it'll take us, you know, maybe two to three years to get back to automotive margins in the, in the low to mid-twenties. That's maybe how we would characterize it. Very helpful, Michael. Can you give us an update on the longevity of enterprise initiatives? ITW continues to find-... 100 basis points. I think we might begin to get a little spoiled here, you know, that it could last indefinitely. How are you thinking about enterprise strategy? Do you still see a long runway of initiatives across your segments? Where will the focus of enterprise strategy be across your segments in 2023? Well. Go ahead, you start. Okay. Well, I think we're in the 10th year now. I think if you add up the combined savings, it's approaching $1.5 billion of structural cost out from 80/20 and from strategic sourcing. When we rolled up the plans here in November and checked back in in January and had a chance to review all the projects and activities that go into delivering these 100 basis points, we were really encouraged by what we saw. So I know that for a couple of years I've been saying this is not gonna go on forever. You were wrong. I was wrong, which happens a lot. I think ultimately, you know, look, I think if you model ITW long term, I'd go back to the TSR model we've given you, which is 4%+ organic growth, incremental margins, in that 35%-40% range. You know, operating income grows 7%. You add acquisitions and buybacks on top of that, EPS grows 9%-10%, and you add an attractive dividend in that 2%-3% range on top of that, you get 11%-13%. Over the long term, that's what you should expect us to deliver. I think, I hesitate to give you a definitive answer on enterprise initiatives because as Scott reminded me, I've been wrong for many years. That's probably how I would think about it, Andy. I would just add in terms of perspective that I think one of the real strengths of our operating methodology and our business model is it's, you know, there's no one definition of perfection. There is always room to get better. We use the business model as the core tool that our 84 divisions use to identify and prioritize opportunities to get better, and I don't see that stopping for quite a while. Right. I think we've said this before. I mean, this proprietary ITW business model is more powerful than it's ever been as we sit here today. It's much different from 10 years ago, three years ago. Our people, we've all gotten better at applying these methodologies, and we're applying it to a much more differentiated portfolio. As long as we continue down that path, I agree with Scott. I don't think it's gonna end any time soon. That's probably how we'd set it up. Appreciate all the color, guys. Thank you. Your next question comes from the line of Andrew Obin of Bank of America. Your line is open. Hey, guys. You have Sabrina Abrams on for Andrew Obin. How are you? Good. How are you? Good. First on the margin guide, the 70 basis points to 170 basis points of year-over-year expansion, you know, includes the 100 basis points of enterprise initiatives, and then I guess the remainder is, 20 basis points of price/cost at the midpoint. I'm just trying to think, is this a conservative approach, since you had 70 basis points of benefit in Q4? Is there a potential upside here? Well, I think maybe what would be helpful, Sabrina, is just, let me just give you some of the elements here that go into the margin improvement on a year-over-year basis. I'm gonna use round numbers here, okay? If we just ended 2022 at operating margins of about 24%, you should expect volume leverage somewhere in the 50-100 basis points of positive contribution to margins year-over-year. The enterprise initiatives, which is sized at about 100, we're certainly gonna make some good progress on, you know, price/cost. The 70 basis points was encouraging in Q4. I think if that's the run rate going into 2023, maybe a little bit better than that. Let's just say price/cost adds approximately 100 basis points based on what we know today. The, the offset to some of this is our typical wages and inflation on wages. We are bringing in some new hires to support our organic growth efforts. We are investing in driving organic growth, including in capacity. That's typically a headwind of less than, you know, 100 basis points. That's running a little bit higher just given the underlying inflation that's in the system. That's probably running at 150-200. You add all that up, you get 100+ basis points of margin improvement on a year-over-year basis, I think that's a pretty good number, Sabrina. Got it. No, thank you. That's helpful. China, I guess, was strong in Auto OEM in 4Q. Just trying to think what's incorporated in your guide for China reopening next year. Well, I think, as we look at kind of on a geographic basis, including China, you know, most of our regions are kind of in that mid-single digits for the year, and China is maybe a little bit higher than that. A big driver, as you pointed out in China, is really the Automotive business where we continue to, you know, make a lot of progress in terms of market share and penetration gains. That's certainly our largest business and also the biggest driver of our growth in China next year. If the total company is 3%-5% organic, China is certainly a little bit higher than that in our current projections as we sit here today, so. Great. Thank you so much. I'll pass it on. Sure. Your next question comes from the line of Jeff Sprague of Vertical Research. Please go ahead, your line is open. Thank you. Good morning, everyone. Hey, Jeff. Hey. Solid results. Just back to enterprise. You know, I've often kind of thought of it maybe incorrectly, you know, as, you know, reflecting a little bit of a trade-off between margin and growth. Maybe, maybe originally it was, you know, more cost-oriented. You know, the organic growth here recently would suggest, you know, you're not trading growth for margin. I wonder if you just kind of comment on that. Obviously, the growth has enjoyed a cyclical lift the last couple of years, so I don't want to overstate the point, but it does seem that, you know, the system is throwing off better organic growth than it had historically. Yeah, just any context on that I think would be interesting. Yeah. First of all, Jeff, thank you for noticing. The, you know, what I would say in terms of just the arc of the last decade we've been on this is that, you know, clearly for the first five to seven years, we had a lot more work to do inside the businesses to get ourselves in position to grow. What we're delivering now is much more about businesses that are, you know, from an operational standpoint, a lot closer to 80% or 90% of their potential. So which allows a lot of our effort and attention then just to be reallocated to commercial opportunities to grow. That's ultimately what is showing up now. We have a lot more sort of energy, collectively being devoted to growth opportunities because we've gotten the internal, you know, the operational positions of these businesses firing in, you know, sort of in really strong position. And so it's. You know, you can't, you can't be great at everything all at once is part of, I think, what we would reflect on over the last decade. One of, you know, the real secrets to the outcomes we've delivered, in my view, is that we've been focused on the right things at the right time, and have not tried to do too much at any stage. But we're clearly now at a stage where organic growth is the 80 of, you know, what we've got opportunities to do and what we've got to deliver on going forward. I think that's reflected in the numbers that we're currently throwing off. You know, Michael gave that piece of the bridge, you know, wage and growth investment. You know, is that number other than kind of the inflationary pressures that you mentioned, is that structurally moving higher, or can that sort of be funded, you know, within the normal incremental margin construct and other levers that you're pulling for? Yeah. That's exactly the way we do it, is we are, you know, we are self-funding our growth investments through our incremental margin contribution. At the 35%- Mm-hmm ... historical and target run rate, that includes, that's after those incremental investments in growth. We are, you know, we are investing in capacity now in a, in a really significant way in headcount in the areas that help us grow and supporting innovation. We're still gonna deliver 100 basis points of margin improvement next year. That just illustrates the point of these businesses are so profitable, every incremental dollars of revenue that we generate organically drives a lot of incremental cash flow, and certainly to support that, we're gonna invest some of that, but it doesn't impair our ability to bring a good chunk of it to the bottom line. Great. Thanks for that context. Your next question is from Stephen Volkmann of Jefferies. Your line is open. Hi. Good morning, guys. Most of my question has been answered. A couple of quick follow-ups. Is there a portion of your portfolio where you would expect to give back price once the sort of lower energy and transportation and raw material costs kind of work their way through? We have a very small portion of our overall portfolio where the pricing is indexed to raw materials. If you add it all up, it's somewhere around 5% of our total revenue, so really an immaterial number, where it's an automatic giveback on price. I think on everything else, you know, we historically command a premium, given the differentiated nature of our products and services and the quality of our delivery, and we expect to maintain that premium as we compete and focus on gaining market share. That's how I would, how I'd answer your question, Steve. Great. I appreciate it. Pretty minimal then. Then just sort of maybe the obligatory question on capital deployment, relative to your thinking on any sort of further divestiture opportunities or M&A pipeline, anything to kind of call out there? Yeah. I think you saw the two divestitures here in the fourth quarter. That's part of, you know, I think we called out a handful of business units about a year ago. The first two are done. We've got a smaller one that's kind of in the works. We've got a more meaningful one that is performing at a really high level right now. I think we're gonna kind of assess the capital markets and conditions and whether it's the right time to launch sometime this summer, and that would kind of round out what we talked about about a year ago. That's kind of where we're at. Great. M&A pipeline? Sorry. Well, yeah, I mean, we get this question every time, we answer it the same way. I mean, I think organic growth is priority one for all the reasons that, you know, Scott just talked about. I think we'd certainly be interested in high-quality acquisitions that accelerate the long-term growth potential of the company, you know, we can improve margins through the implementation of the business model, and we can earn a reasonable rate of return on our shareholders' capital. MTS is a good example of an acquisition that checks all the boxes. That was a pretty big one we did a year ago. To the extent that other opportunities like that present themselves that check the boxes, you know, we're definitely gonna lean in in a big way. Maybe just a little color on top of that that's more sort of topical near term is, you know, what I would say generally is that, you know, we are not looking to acquire broken businesses. We're looking to acquire good businesses and help them be great businesses. In environments where the sort of economic-- the macro is uncertain, those good businesses, those are really not a good time to sell. If anything, I'd say that the environment until the macro trajectory gets a little bit more clear, I, you know, I would expect that, you know, the opportunities might be a little less than normal this year, at least through the first half. We'll see. Good. Appreciate the color. Thank you. Your next question comes from the line of John Joyner of BMO Capital Markets. Your line is open. Excellent. Thank you. So the Food Equipment business, as you have highlighted, has definitely been a standout for you. After attending the NAFEM Food Equipment Show yesterday, I thought there was a noticeable difference in how the FEG business seems to be presenting itself more cohesively than before. Will you comment on this aspect and also on some of the things that you're doing there with regard to consolidating sales reps and allocating more investments toward maybe the cooking side, specifically products like combi ovens and fryers, which are certainly areas that have well-known large competitors? Well, I'll take a stab. I think we're not really doing anything different than we have over the last, you know, five years in the Food Equipment business. We've continued to invest in differentiated products, you know, including the categories that you mentioned. The team has been putting up some really great numbers as a result of executing on their strategy. If you add up the organic growth rate here, over, you know, 17% coming out of the, you know, pandemic, 23% last year. This year, high single digit, double digit, and that's really as a result of us innovating and growing all product categories. Can I add to that? Near term, our supply capability is winning us business. Yeah, definitely. I think, this has been an area where, kind of back to our Win the Recovery positioning and the decision to carry, you know, enough inventory to service our customers, you know, with the same level of excellence in difficult supply chain, under difficult supply chain conditions has paid off in a big way. I think if you get the sense that, the Food Equipment team is in a, in a good mood, I think that's because they're gaining share and putting up some really strong numbers, including on the margin side. You know, if you look at that almost 500 basis points of improvement on a year-over-year basis. That business, like we said, has got a ton of momentum going into 2023, and we're very bullish on the future here. Okay. Thank you. Yes, they were definitely in a good mood. Thank you for your time. Good. Good. Your next question comes from the line of Joe O'Dea of Wells Fargo. Your line is open. Good morning. Thanks for taking my questions. Sure. I wanted to start the slide four, where you show the 300 basis points of outgrowth versus the proxy group over the last couple of years. Can you talk to sort of attribution of that? I think obviously a pricing environment where we've seen different trends across different companies, so not sure the degree to which maybe pricing is outpacing. The degree to which it's volume, you know, is it primarily share gain and just your confidence in the stickiness of those share gains as supply chain corrects? I guess I'll, you know, my response would be that there's no way that we can break this apart into various pieces. What I can say is that the proof is in the pudding. Ultimately, it's in the performance and our ability to consistently outperform. We're not claiming victory here. We're not. You know, we got a lot of room to go across the company in terms of our ability to consistently deliver the kind of organic growth that we're capable of. You know, what we are saying is we put a couple of years on the board where we are outgrowing our peers in the aggregate. You know, what% of that is our market exposures versus theirs or different approaches to pricing or supply capability? I'd say all of the above. In the end, it doesn't matter as long as we're able to consistently, you know, outgrow our peers and outgrow our markets. That's really the goal. I guess related to that, as you're seeing maybe supply chain ease, and I don't know if competitors are in the market in a little bit more competitive way, but any challenges now that you know, that you didn't see, you know, maybe six or 12 months ago? Yeah, I think, Joe, from the beginning, the Win the Recovery positioning was all about strategic share gains focused primarily on our existing customers. We were not interested in opportunistic one-time orders. We're pretty confident with that direction these share gains are gonna stick. I think the pandemic and the supply chain disruptions were a great opportunity for ITW to demonstrate how differentiated our supply chain capabilities are. For those customers that didn't know. I think that's been really. That's what's contributing, you know, also to the, you know, the outgrowth relative to peers. I mean, that's one more element of the equation as you talked about with Scott. I just wanted to clarify on the average daily sales + 2 versus seasonal or + 4 versus seasonal + 2. The degree to which that's underlying demand accelerating versus maybe backlog burn, I think it's hard to parse given, you know, broadly inflated backlogs out there what underlying demand trends look like. Any comments on what you're seeing sort of underlying accelerate versus decel? Well, I think, you know, we're not a backlog-driven company. As you know, we don't carry a lot of backlog and as you also say, it's hard to parse out what was backlog versus new orders. I'm not sure I can give you a great answer. What I can tell you is that, you know, typically our sales per day go up by 2% if you go back and look in time, and they went up by 4%. Things are definitely not slowing. We've got some great momentum going into Q1 in 2023. Great. I appreciate the color. Sure. Your next question comes from the line of Julian Mitchell of Barclays. Your line is open. Hi. Morning. Thanks for squeezing me in. Maybe I just wanted to circle back to the organic sales growth guide and totally understand you don't bake in elaborate, you know, macro gyrations within that, and that's a very sensible approach. You've got the 4% growth guide for the year as a whole organically at the midpoint. You just did low double digit the most recent quarter. Just want to understand, you know, how we think about that sort of step down. Is it a steady deceleration as we go through the year? Anything in particular we should bear in mind on, you know, one or two year stacks? Any color at all really that you could give on how we think about the +4 moving through 2023. It's all in the comparisons year-over-year, Julian. Like I said, we expect the year to play out from a revenue standpoint, in line with our typical cadence. Q1 starts out a little bit lower, and then we kinda improve from there. There's nothing baked in in terms of a big acceleration in the back half or deceleration in the back half. We've kinda done our best here to model current levels of demand risk-adjusted for the areas where we're seeing some slowing in demand, and that we come up with 3% - 5%. I think if you run the math, you'll see kinda the first half is, you know, the growth rates are maybe towards the higher end of that 3%-5%, the second half is towards the lower end, that's all driven by the comps on a year-over-year basis. That's very clear. Thank you. Then within Construction Products, I don't think we dealt with that one yet. Apologies if you have to repeat anything. You know, that sort of down 4% guide for the year, there's probably a bit of price in there. Some of the volumes are down, you know, high single digit or something. Maybe just help us understand, you know, what's embedded within that. I think simplistically you have, you know, a third is resi new build, a third is resi replacement, a third is commercial. Those three big pieces, how are you sort of thinking about those this year? I mean, the big driver, Julian, is the housing, market. New. New housing. The residential side is about 80% of our business here in North America, and that's where we're seeing some slowing, which we've talked about since the summer, I think. There's nothing new here. That's the big driver here. The commercial side is hanging in there. As I said, it was also our strongest business, you know, in the summer after the pandemic. Right. Yeah. I mean. Part of the advantage of the different end market exposures we have is that we can, you know, we're always gonna have some in the tailwind mode and some in the headwind mode, but the net mix of it all is pretty positive. Yeah. It's gonna be down a little this year, but it's also been a business that's really performed well for us when other parts of the macro have been challenged, so. That makes sense. Thank you. Thank you. Thank you for participating in today's conference call. All lines may disconnect at this time.