Hi, good morning. My name is Saree Boroditsky. I cover Multi-Industrials at Jefferies. We're very excited today to host Lincoln Electric, Gabe Bruno, CFO. We're gonna host this as a fireside chat. If you do have any questions, feel free to interrupt, just raise your hand. And with that, we'll just dive in. Thanks for joining us today. Thanks, Saree, and also, welcome all of you with the interest in Lincoln Electric. Starting off, you highlighted strong momentum into July during your earnings call. First, have those trends continued? And then how are you thinking about the disconnect between some of the weaker industrial macro indicators we've been seeing over the last year and what you're hearing from customers? All right, thanks, Saree, for that question. As we reported our second quarter results, we saw strength across all three of our product areas. You know, and with significant backlogs in automation equipment, and in particular, we noted, as you cite, the strength in the consumables activity at the end of the second quarter into July. That's a good sign for factory activity. We did see that moderate into August, so more of a leveling year-over-year in the August timeframe. August is always a difficult time to gauge, but I think it does give a little bit of indication in the third quarter of some moderation in the consumables activity in the month of August. So we saw strength coming into the quarter, kinda leveling off year-over-year. And when you look at, the strength in our backlog, we remain in growth mode and very confident in our organic, growth assumptions for the year. We've got a significant level of, backlog, scheduled to ship, particularly in the fourth quarter, and we remain very confident in the mix of business. In terms of the dynamics of, industrial measures and activity, you know, I like to think about short cycle and the long-term, cycle and the capital investment, trajectory. You know, second quarter, we saw general industries down single digits, which was, first time in a long time. But despite that, we've seen overall strength and growth in our business. So I think it's a mix of different parts of the end markets we serve. When I think about automotive, where we saw that end market down in the mid-single digits, still we've strong production levels there, significant amount of capital investment projected out in the long term, so we remain confident. So, still growth mode, still anchored on confidently into our organic assumptions for the year, which is in that mid- to high-single digits organic growth. Maybe digging into the end markets a little bit, you know, you talked about auto being down on the slowdown on equipment and automation deliveries there. Have you seen any of that activity pushed out further, given some of the uncertainty around the auto strikes? No, we continue to be bullish on the long-term capital investment in automotive. The transition to EV provides a nice growth secular driver in the long term, so we continue to be bullish on what automotive means to us in the long term. And maybe on energy, it's one area that's come back strong, high levels of pipeline activity. I believe you talked about accelerating demand there, but maybe a little bit more detail on what you're expecting on that market going forward. The fundamentals on oil and gas, LNG, are pretty strong when you think about, pricing and, curtailment long term on capital investments, so we're pretty bullish on energy. We're still, far behind, you know, 20% plus from peak, so we think there's a lot of runway there. There's a lot of good activity, progressing in the North American markets, miles of pipeline midstream activity. We've seen good activity in the Middle East and Asia, so we continue to be bullish on what the energy, profile looks like for us. Then on structural, that business has been under pressure, I think, the last couple of quarters. What's driving this weakness, and are you expecting to see demand inflect positively there? Yeah, so we saw a good two years of strength in structural and infrastructure build-out and activity there. So we have been tracking against tough comps. We did see some softening when you think about overall activity, when we like to measure things like the Architectural Billings index, and you saw that dynamic as we ended 2022. Starting to see that turn positive, so we do think we're at an inflection point. We do think that we'll see good activity progressively. Comps do become easier year-over-year, but we think the dynamics there from an infrastructure and build-out is gonna start to inflect positively. That's what I like to hear. Europe is one area of cautiousness for the business. I know August is a pretty hard month to gain any info from, but any update on what you're seeing there from an underlying demand perspective? Yeah, Europe in general, you know, we'll remain cautious when you just track the overall industrial activity. But we're tracking in this third quarter seasonally, which means that from the second quarter to third quarter, you'll see the normal impact of the shutdowns. But we'll remain cautious. It's difficult to gauge. September is always an important month as our operations gets back from the shutdowns, the traditional vacation schedules in August. So we'll have more to see as we progress into the third quarter. You've been understandably cautious on Harris, given the residential and retail exposure there. How do you think about demand for this segment as comps get easier in the fourth quarter and into next year? Well, third quarter is gonna be tough because of the HVAC strength we saw last year, and we continue to see challenge on the retail side, although we're optimistic that we've bottomed them out and started to turn that around. But, we're more bullish into the fourth quarter. Third quarter will be tough comps. We think we're behind the larger inventory adjustments that you see in the retail type sector. But, once we get through the tough comps in the third quarter, I think we're in a good position to start to inflect our growth. Then maybe turning to automation, I think you were at $400 million in sales in 2020. Now you're run rating at $900 million, closing in on your billion-dollar target. You know, how do you think about underlying growth from both an organic and inorganic perspective from here? Yep, we're very excited about where we are in our strategy to drive growth through our automation portfolio of offerings. We're well on our way to exceed that billion-dollar target. We anchor on organic growth into the high single digits. We'll continue to look for opportunities to look for acquisitions to continue to broaden out our portfolio. So we're very excited about the long-term trajectory of automation. And then how has automation driven customer loyalty or stickiness? Have you seen an increase there? Yeah, so I, I'll give you a couple of examples. So when you think about multi-plant operations, and you make a significant investment, you've got a lot on the line from a customer standpoint. And so we see stickiness when you built out one plant with the capabilities around an automation solution, then you continue on multiple plants. And you also see the tie-in to consumables. So consumables is not part of how we report out our automation results, but substantially all, if not all, of the operations that we put into place with automation solutions use our consumables. So you see that stickiness in just the anchor around the quality, reliability of the solutions we deploy. Is that mandated that they use the consumables on the automation? It's not mandated, but when you're investing significantly in automation, you wanna make sure your uptime and your productivity is meeting the objectives, and so the high-quality wire that we provide helps ensure that. What's the return on investment for an automation project for an OEM? And assuming they're getting a return, like, how do we think about pricing for higher margins, and does that change over time? Yeah, so I'll differentiate. When you think about, cobots or standard engineered-type robotic cells, that payback could be 12 months or less. It's shorter cycle, looking at, labor content within that. When you're looking at larger scale investments, that could get into the $multi-millions, even the $10s of millions, you're looking at paybacks are probably in that 2- to 3-year type of period. So we price on value, like we do for all of our business. Our margin profile is driven by how we have shaped our business, so we continue to expect, work around LBS, our Lincoln Business System, as well as volume-type growth, and we'll continue to leverage that as we continue to shape our business model. So we're anchored on that mid-teens type profile within our automation business, and we'll continue to price in, in our value proposition that makes sense in how we engage our customers. But, we look to continue to drive margin improvement. And then beyond that mid-teens margin level, like, do you think that there's potential upside for there, given that you're providing a return to customers? We believe that's the right target for now. We've got some work to be done still there, but we're well on our way. Can you talk a little bit about the competitive environment in automation and how your solutions differ from competitors? Yeah, so we're very much solutions driven, as you point out, and then we serve a broad base of end markets, automotive, general industry, heavy industries. We think about the competitive market in North America, which is very fragmented. You're working competitively against systems, other systems integrators, so that provides us opportunity for acquisitions. Looking at system integrators that may tie into certain end markets or certain capabilities that continue to build out our portfolio. On the international side, it's much different. A lot of the robotic suppliers are vertically integrated, and they also act as systems integrators. And so for us, we think through how do we continue to broaden our footprint international? The Fori acquisition was important for us from that basis, and we had they had presence in South Korea, in India, in China, in Europe, and so that's a focus point for us. How do we broaden out our automation solutions and footprint around the international markets? And that's how we look at it. Lincoln has historically had a pretty flexible cost structure, given your compensation structure in Americas. Automation is obviously more of a fixed cost business. I think you have over 2,000 employees there. How do you think about this impacting your cost structure from a decremental, incremental margin perspective? Well, you're right, Saree. You point out that the fixed cost structure on our automation business is much different than the core welding, particularly in the Americas segment. We've got over 2,000 engineers, technicians, employees within our automation footprint. We look at that as more of a fixed part of our business and our business model. You got significant footprint of many facilities as we're building out these significant automation solutions. So we expect higher incrementals and higher decrementals, and so that's gonna be a pressure point on the downside, and it'll be an accretive opportunity for us on the upside. You know, kind of going back to when I started talking about the auto industry, you know, you've talked about secular growth opportunities from the transition from EVs. So I'm just wondering, when an auto OEM decides to add a line, and that maybe that's an EV or a changeover, you know, what is the typical revenue opportunity from Lincoln per, per that line? Yeah. So first, I'll comment when you're looking at these product changeovers, I mean, you're dealing with high volume production equipment. So typically, you don't see the OEMs anchored on the used equipment. They're building out new because you got uptime, productivity, efficiency requirements in the product offering. So expect a redundant level of investment as new product lines come to play. When you think about how we participate in that, you've got, obviously, production translates into consumables. So we'll always have a little, a tie-in to how automation solutions, investing in, and it could be investment into $ low single millions to $ tens of millions. And when we look at the opportunities like a Fori type business, it could be $ tens of millions. We've got a lot of opportunity in our standard equipment, consumables, ongoing consumable opportunity, but then an ongoing footprint on how you build out a line, and it could be $ tens of millions. Then, you know, does the shift to EVs change anything from a welding perspective? Like, outside of Tesla, have you seen any OEMs lowering the number of parts used to construct the vehicles? Yeah. Our engineers have gone through the analysis on traditional ICE vehicles and EVs, and we look at the value add in consumables to be a push. We see that the move from a muffler exhaust system to battery to complement the overall value add in welding, so we don't see that. In terms of components, we haven't seen any significant changes in the component profile with an EV and ICE. There is some discussion on castings, whether that's an opportunity for driving efficiency in the parts manufacturing. That's still some time to really take hold and see if that's an appropriate long-term process. You know, there's been a lot of talk about the DC Fast Charger initiative. You know, first, is this running on schedule? I think the production launch was in the fourth quarter of this year. And then, are you impacted by the recent joint venture that was announced by a number of the auto OEMs, still looking to build about 30,000 charging stations? Yeah, think about three key work streams on our EV strategy and initiative. One, on the commercial side, progressing very well, and we think about this opportunity with the-- on the private sector, whether it's public or private, that's an opportunity for us. We look to... Our first launch is anchored on a 150 kW DC charger. We're on schedule from a product development to second work stream, and from an operations capacity standpoint, we're on schedule. We'll continue to update the markets, but we're very confident that we continue to work on schedule. How do you think about the margin profile on the chargers, and does that change over time as you ramp up production and then manufacturing know-how? It's still early, so a lot of work to be done in the months and years to come. But we do believe it will be accretive to our, to our EBIT profile. So we're leveraging capabilities in manufacturing. The equipment we're producing is within our equipment manufacturing facility, so the investment we're making, you know, $15 million investment, is anchored around PC electronics, power electronics, so we can leverage that. So a lot of leveraging we're doing around that. So we think it's gonna be a modest investment for a lot of upside, so we're very focused on that. One more question on the chargers. You know, thinking about that ramp, does the price to customers change over time as you ramp production? Well, it's early on pricing as well, but we're anchored on that 150 kW DC Fast Charger at that $100,000 price point, and so we'll continue to navigate that as the market matures. Then, I guess, just quickly, is there any questions from the audience? Okay, we'll go on. International margins have been pressured versus last year, despite seeing some sequential improvement. You know, what do you need to see to get back to that strong margin performance you saw in the first half of 2022? So for our international segment, our EBIT target, as you know, is that 12%-14% range, and I'm very proud of our team and how we've shaped our business model over the last few years. The first half of 2022, we had some acceleration on activity because of the Russia dynamics, had a little bit of advantage on costing and our FIFO inventory in Europe. So we hit that 14%, the high end of that range. And as you remember, we talked about hitting double digits again, EBIT first quarter, and then getting into that range in the second half. So we're ahead of schedule. First half of the year, we're at over 12% EBIT profile, and our teams are anchored on continuing to drive improvement. Right now we're going through our 2030 strategy and refreshing the areas of focus, and I can assure you that our international team is anchored on driving the higher end of that range. We're happy to have a preview of that 2030 target today, if you, you wanna share. You know, one of the reasons for the margin difference in Americas versus international is the fragmentation. You know, is there an opportunity to consolidate this over time, or what else could you see to help drive those margin profiles closer together? Well, you're right that the fragmentation in markets have a real impact on competitive positioning, and we look at that as an acquisition opportunity as well. We know, as you can appreciate the core welding markets very well, there's a lot of private companies that we'd be interested in. They just don't come to play yet in terms of an acquisition opportunity, but we continue to monitor. So you have that dynamic. That provides an opportunity, but that's the competitive footprint internationally. The other driver, which is important, is inherently the fixed cost structure, which has been a key driver to how we have improved the international margin profile. So, a lot more flexibility, as we've already talked about in the Americas and the variable cost structure we have there. More challenged on the international side. We'll continue to see that difference in what a margin profile looks to from Americas International because of that fixed cost structure, and look to the fragmentation competitively as opportunities for acquisitions. You know, maybe turn a little bit to pricing. Total pricing up, I think, almost 25% since 2020. How are you thinking about additional price increases today? You know, and given the magnitude of price increases over the last couple of years, do you expect to see any price declines if input costs start to come down? Okay, so price increases are a function of inflationary drivers, right? And our posture is to be price-cost neutral, and we continue to operate in an inflationary environment, so expect that kind of posture. When you look at our business model long term, we have held price. There may be one-off OEM types contracts that we'll have to work through, but in general, we hold price, and we respond to inflationary drivers through a price-cost neutral strategy. Maybe a little bit on capital deployment. Acquisitions, I think, are expected to add 3%-4% to top-line growth over time. You know, obviously, recent acquisitions have focused on automation. Maybe talk about any geography or end market preferences going forward, and, you know, how are you thinking about deal sizes that you'd like to acquire as well? Well, I'm gonna start with deal sizes. You'll see on average, we're probably in that $50-$100 million range when you look at the fragmentation in the markets, both in core welding but also in automation. So those will continue to be opportunities for us. We are very disciplined in navigating targets and opportunities from an acquisition standpoint. We have a senior executive that is driving a top-down approach and looking at the markets and what potential pipeline looks like of acquisition opportunities. You have seen more in the last 10 years tied to automation, but we're looking at all parts of our business. We've done, as you know, acquisitions on the Harris side to broaden out our footprint servicing customers. We look to businesses in South America or in international to continue to broaden our footprint, but also add capabilities. So we look to all geographies in core welding and automation. That's a key driver for us in long-term growth, and our strategy outline is to be at that 300-400 basis points CAGR. We'll put a lot of pressure on ourselves as we continue to grow the company, and 3%-4% is a much bigger number over time, but we're very focused on the key part of our strategy. Have you seen deal multiples come down recently? Well, it depends what you're looking at, right? On the automation side of things, we continue to see multiple pressure there. Again, that's continue to be a growth mode, but we'll continue to monitor, see how that progresses. Then sticking with capital deployment, you've been buying back shares consistently. How are you thinking about returning cash to shareholders versus investing internally? Yeah. Well, first, we wanna invest for growth, and you saw that we moved up our CapEx assumptions for this year, and very much looking at... Now, our internal investments are high return investments. So we don't do anything to limit our ability to grow and invest internally on new product introductions or capacity or automation within our own businesses and cost reduction activities. So we're gonna prioritize investment, and we're not gonna limit any investment on the internal CapEx. Then, as we just talked about, acquisitions, right? So we are very much focused on internal and inorganic type growth as a first priority in capital deployment. Then we return cash to shareholders in a very disciplined way. You know, we've increased the dividend rate 27 years since trading on Nasdaq in 1995, and we'll continue to look at that as a means for returning cash to shareholders. The way we think about share repurchases is maintenance first, and which is we hover around $60 million for maintenance, and then we're opportunistic. So you've, you've seen us steadily in the market, and we're just opportunistic as we see the progression of excess strategic cash, and that's how we look at it. Question from the audience? Just on the charger business, if we thought about the end market where you are most likely build a sustainable business, would we be right thinking really the industrial space as mines electrify their fleet, forklifts versus going head-to-head in what we all picture to be, you know, fast charging, you know, competing with Tesla? Like, if we look at the end markets where you'd be most likely to succeed or where you are targeting on- Yes. So that's a great question, and the way we look at it is that we're gonna participate in where the opportunities are in both the public and private sectors. So the fleets are nice opportunities for us, and so we're navigating the commercial opportunities there, but we're anchored on both opportunities, the public charging opportunities and charge point operators, but then working with fleets as well, is an opportunity for us to grow. So we haven't differentiated, said this is gonna be more of an opportunity for us. We're just feeling our way through how to position our high-quality type products in the market. And could those opportunities be white labeling the chargers for the OEM JVs, Tesla longer term, or this is your brand and- I mean, we're open. I mean, obviously, our brand means, means reliability, quality, and that, but we're still working through, you know, how we brand, how we commercialize our product line. Okay, just one more on the charger, quick okay. Why did Ohio, because it's your hometown, really, or, or state, why did they choose a Taiwanese charging company? Is it price where you, you didn't have a product yet? Well, I think a lot, a lot of it has to do with it not having a product available yet. But I'm not gonna speak to their own decision-making, but, you know, once we do introduce our products, we start taking a foothold into the markets and introduce our Lincoln brand into reliability, quality, and we expect—we're confident that's gonna provide a driver for growth. Any other questions from the audience? Okay, maybe just sticking a little bit building on that question, but, like, how do you evaluate entering new areas such as EV charging and additive? And, like, what do you need to see to proceed with those investments? Well, both of these opportunities anchor on core capabilities. When you think about the EV, DC fast charger, it's power electronics, and it looks like a lot of the guts in some of our, boutique, equipment. So it's anchored on our leveraging our key capabilities. Additive is the same thing, where we're leveraging robotic capabilities, our wire software, to be able to introduce a capability that could be a game changer in its supply chain, in large part, sourcing. So we're first anchored on, does it make sense to us and how we operate? What are our core capabilities? What's the investment profile for each of those dynamics? We look at both of those to be, modest investments with significant upside opportunities. So that gives us the opportunity to be patient in nurturing and developing the technology, the commercial footprint, the products, the operating capabilities, and look long term to drive an acceleration in growth. So both of those are anchored right in our sweet spot in capabilities. Well, thanks for joining us, and we'll see you next week at FABTECH. All right.