Morning, thanks for joining us today. My name is Saree Boroditsky. I cover multi-industrials here at Jefferies. We're very excited to have Lincoln Electric, including Gabe Bruno, CFO, with us today, and we're gonna dive into some fireside chat questions. If you have any questions, please feel free to raise your hands, at any time. So thank you for joining us. Thank you for having me. So I sent a bunch of questions, like, two weeks ago that we're throwing out the window. Let's talk about some of the recent environment and what you're seeing. You kind of updated the guidance to down mid- to high-single digits. So maybe just what you're seeing in the market that kind of caused this change. Yeah. So just in general, you know, we have been pointing to some of the softer elements of the markets. You know, we knew that heavy industries driven by ag, some construction, general industries, just being have a lot of pressure in general industries. And then we had talked about the automotive industry and the implications in our automation business, as well as short cycle activity on the automation side. So we've seen more of the same. And you know, we had pointed in our earnings call that we'd be pushing the higher unfavorable end of the range of mid-single digits, so that's more like the 6%. So as we saw activity continue into August, and August is always a tough month because you've got a lot of vacation schedules and plant shutdowns that are typical and planned during the season, but we just see continuation of softness. You saw the macro reports on PMI and the like, so we see that as well. So that's what pointing us to think, you know, what we're seeing is more in line to mid-single digits down in organic demand. So more of the same, but a little bit more softer. Maybe just thinking about, like, what's the visibility here? Because if I remember correctly, and Amanda's in the audience can correct me, but I think it was from November two thousand and fourteen was the last time that you guys pre-announced negative. Now it's kind of two times in a row. So just like, what's going on in the environment that makes this visibility a little bit more different than other years? Yeah, we're just seeing that the short cycle component of our business continues to remain soft, and no real change in the macros. We also have the element of the automation business. You know, that is a much larger portion of our business today than it was in 2015, 2016, and the short cycle component of that business is about 15% of our overall run rate in automation. But we're just seeing a pause in capital investment and what it means into new projects on the automotive side, even on heavy industries. We're seeing a little pressure there in general industries. So we're seeing that's the biggest difference in our business, automation, and what that means into short cycle, as well as how we see the progression in the next quarter or so. I think in your prior commentary, you talked about 2025, kind of heavy industries production maybe being a little bit flattish, so not seeing maybe a recovery there. You know, how do we think about that from an equipment versus a consumable side, and how does your business, I think, change versus the heavy? Well, it's interesting you mentioned consumable equipment on heavy industries. Think about consumables tied to production. So that's the first area to see softening in demand, should production levels slow. Equipment was actually up, so there's still that level of investment in some of the long-term drivers of capacity and productivity. But we saw consumables, and consumables was down almost double digits in the second quarter in heavy industries. I mean, that's again largely tied to ag, but there's also some elements of construction there. So we just don't see much upside in the short term on heavy industries. We see that continue on probably deep into twenty twenty-five. And then, so, you know, consumables, heavy industry, maybe, maybe flattish, and then how do we think about a recovery in capital investment? Because that's been one of the areas that you highlight as being a little bit softer on the automation side. Yeah, the visibility is pretty tough to see. I mean, we know that our, for example, the automation business is a good bellwether of capital investment and lots of quoting activity, pretty high level of quoting activity, just not turning the corner in actual investment, so not seeing that in orders, so when there's more confidence in the markets, you know, when our customers are seeing more confidence in the buildup of capacity and opportunities to drive productivity, we'll see more capital investment. We just haven't seen that turn into orders in the short term. Again, if you have any questions, please just feel free to raise your hand. You know, I think one of the bright spots you talked about was energy. Mm-hmm. Maybe, you know, are you seeing that continue, and what's kind of the growth trajectory there? Energy continues to be strong, mainly driven by oil and gas, renewable energy opportunities and strengthening in the Middle East, for example, and India. We see that momentum continuing through the balance of the year, and we've got some applications that are tied to that part of the end market, and so we're pretty confident that momentum should continue. Maybe turning to the margins, I think that's been one area that's been a bright spot- Mm-hmm ... despite the lower volumes. You know, given kind of the weaker environment you're seeing, you know, as you even get to through 2025, does that change how you're thinking of cost cutting? And how just are you thinking about that as we go forward? Yeah. So margins have been a great story for us. You know, in our strategy, we're focused on driving it to two hundred basis point improvement in the overall margin average, operating margin profile, and we're well on top of that. And if you look back at some of the historical cycles where you've seen declines in demand, we're ahead of that about two hundred and fifty basis points on average. So we're really pleased with how the team has developed our business model, whether it's in the Americas, automation, international, Harris, and feel that we're very well positioned in managing through this cycle as we've done many a times before. Now, that said. You know, we did point to, in our updates yesterday, probably fifty basis point-ish impact in what we're seeing short term. If you remember, we talked about our operating margins this year, about 17.5%, excluding acquisitions, about a 30 basis points impact on acquisitions. So you just take 50 basis points on top of that. We do expect more of that pressure into this third quarter. You know, we have a traditional playbook, as the market knows, that we're pretty disciplined in executing. And as we're deploying actions, both temporary, and we'll look for opportunities on the structural part of our business, but it takes a little bit of time to ramp up. We're very much focused on protecting the operating margin profile of our business. We typically exit these types of environments stronger in terms of the operating margin profile of our business, and so we're putting together a playbook, taking actions to drive temporary costs out of our business. We do expect, again, short term, some impact up to 50 basis points, but more so third quarter, start to protect ourselves more, so see impacts in the fourth quarter. You know, the decrementals have still been pretty good on this business, and I guess, you know, as I think about comparing them to past levels, I would have thought they would have been worse, given more of the fixed cost automation business, which keeps getting larger. So what's the offsets there? You've got across-the-board improvements in the Americas and International and Harris. The automation component of our business does have a higher fixed cost nature in our model. We added a lot more engineering and technical capacities. We've got a 2,100-employee team that's servicing the markets from an automation standpoint, and then all the facilities, so heavier fixed costs, that generally means higher incrementals and higher decrementals, and we think of higher incrementals being into the 30s on the decremental side, into the mid- to high 20s, so you've got that dynamic. This puts pressure. Our decrementals overall, we expect to be in the mid-20s under this kind of profile of our organic demand, as well as the acquisitions. But it's just all the work we've done across all of our businesses to respond to changing demand patterns and then also continuous improvement in shaping our models. Just kind of diving into those a little bit more. You've been trending at the high end of your long-term algorithm for Americas. You know, are we already at a higher sustainable margin rate, or put a different way, like, what would it take to get back to a 17% margin there? Yeah. So you're right that we're at the higher level of performance, and we expect the model performs that way. In a down cycle and with the mix of automation, we do expect pressure on the Americas side, still within the range, maybe pushing closer to that 17%-18% range because of decrementals within the automation space, but still very healthy. The model is positioned to perform at the higher level, and we've been performing in excess of that, and we'll expect that, as we navigate through this environment, we'll continue to perform at the higher level. Another business that's been outperforming is Harris. I think they're well above their long-term targets at this point. So, you know, what are some of the structural changes in this business that have led to that margin improvement? And is there additional opportunities to bring these margins closer to Americas? Yeah, so in general, then just our team has done just a lot of work in the business model, and we had an acquisition a couple of years back that we had to do a lot of shaping, which is a typical framing of how we look at acquisitions. Typically, the acquisitions we have are a little bit lower of a margin base, and we apply a lot of our business systems surrounding the targets, and then we built them into our established model. So we've made a lot of improvements in the business model, including the integration of acquisitions. We also have at Harris a very disciplined price cost work that we do because of the silver and the copper content we have in that business. So very disciplined price cost actions and continuously looking at opportunities to leverage within the model. You know, we've been performing excess of our 13%-15% target, as you mentioned, Sari, but we're probably in that 16%-17% type range, as we mentioned in the call. We still are confident in the execution there, and that's kind of how we see the business today. You know, as we think about 2030, in general, we look to continually shaping each of our segments. So you can expect for a continuous improvement mindset, and that mindset includes 200 basis points of consistent improvement in the operating profile. We see that with Harris for sure. I'll just open up to questions. Do you have any? Okay. International margins been a little bit weaker than the other segments. So what do you need to see from a demand or a self-help perspective in that segment to get margins at the high end of the target range like you've seen in the other businesses? Yeah, the international story, really, 75% of our international business is EMEA, and it's been tough macros in the European market. So we need a modest level of demand. We believe that the business model is shaped to operate within that 12%-14% range, and at the higher end, just modest level of demand, some more stability in the macros within European markets. In the international, we still see a lot of opportunity in the Middle East, certain pockets within Asia and India. Those are some growth drivers, but overall, we need to see improvement in the EMEA demand profile and the macros there. You know, what's the difference structurally in your, you know, the rest of the world, that means that margins can't get to Americas' levels? And what would you need to see, like, over time to get those margins closer to Americas? We expect to always see a gap. I mean, the competitive environment in the international markets and the structural differences, fixed cost structure in many of the, for example, the EMEA markets, are not going to drive the same profile as we have in the Americas. So each of our teams will be driven to improving the margin profile, and you look at the international business, and it's more than doubled last five years or so. But because of the inherent competitive and fixed cost structure, we'll see a gap. The Americas side will continue to drive improvement. Let me remind you that 80% of our automation business is in the Americas region, so we're continuing to work on improving the automation profile to our targeted mid-teens, our corporate average on margins. We're not there yet, and we got a few hundred basis points to work through that, but we expect Americas to continue to improve, and we also expect each of the Harris and International business models to improve, but still a gap in the structural differences in the businesses. You know, you mentioned automation margins, so I have to slide one in here. You know, why can't those margins be higher? Because, you know, you are offering a return on investment to your customers. So just how do you think about pricing those solutions? Yeah, it's the automation approach to pricing is different than standard products out of consumables or equipment. It's really driven by the value proposition that we offer, and you mentioned returns, very good returns. But they're driven by the project proposal and what we do from quoting to execution. And that's been the most significant part of how we've improved the margins. So we competitively position our value proposition, driven productivity, efficiency, and the like, but then continuously think about what are the cost drivers, or what's the engineering content, and how disciplined are we in executing to that? So a lot of what we see in the improvement of the automation margins is about how are we driving in a more efficient business model. So we think that's the path to get to our corporate average and continue driving improvement on the automation model. You know, innovation has been key to your equipment portfolio, and I think you even mentioned that equipment in heavy industries was one of the bright spots. So I think you've launched over 50 new products last year. You know, how do you see that rate of new product introductions going forward, and does that help you gain market share, or is that something you just need to be able to compete? There's definitely a defensive posture in looking at the velocity of introducing technology, but there's also market share. I mean, definitely an opportunity for us to drive accelerated growth. When we think strategically, our whole strategy surrounding innovation, technology, providing solutions to our customers, and that means that we're introducing new technologies that are inherently gonna be opportunities to our productivity, quality, and a more safe experience for our customers. So we're very much focused on innovation. I like to point to our equipment Vitality Index. It gives you a sense of the velocity of the introduction of new products within the market. In 2023, 57% of our sales and equipment were from new products introduced in the last five years. It gives you the sense of the velocity of new technology introduction. We have an upcoming industry trade show, FABTECH, in October. We'll have up to 20 new products, very much focused on the development, introducing new technologies, but also introducing how the acquisitions we've just made have also provided more capabilities from a technology standpoint, so innovation is very key to our growth drivers, and we think long term that it's a very competitive market, and we making the right investments to stay in the lead and be the market leader we are in welding. So, I mean, do you think you continue to outperform on the equipment side, and like, what would the ultimate share of revenue be? Because I think you have, you know, increased this over time in the last few years, and how does this impact margins? So when you look at standard equipment and consumables, there, our margin profiles are similar. The automation business is where we're looking to improve our margin profile within that. But you're right, when you look at the mix of our business, we have continuously shape-shifted about 50 to 100 basis points of business into equipment. So the mix of our business has been more heavily equipment over the last few years. So now we're 53% consumables, 47% equipment. The automation component of our business is also within our equipment measurements from a product standpoint, and that has also been accelerated growth. So we don't have a perfect mix, but we know the growth drivers are gonna continue to accelerate in automation. We'll continue to see the mix evolve between consumables and equipment because of that, but we don't have a perfect mix of that. But the margin drivers are gonna be largely in improving the automation component of our business. You know, when I look at average organic volume growth in Americas since 2019, I think it's relatively flattish. So, you know, how has the welding market performed relative to that, and how do you think about welding market demand versus your growth going forward? You know, when we think about overall market, 2019 is a good gauge. The flattish would lead you to take away that the overall welding market has underperformed because a lot of the acceleration, which has been growth, but also pure organic growth, but also market share in automation, part of the equipment side. So it's been tough couple of years in looking at 2019, 2020 with COVID. Seen some growth the last year or so and overall organic trends have been a bit more challenged. So we see more accelerated growth coming through automation and introducing new technologies and just monitoring the progression of overall industrial production, PMI trends around the globe. It's a mere question on international. You know, you know, where do you expect organic volumes to come from in the medium to long term, you know, by region, by market?... and I see that mix there. Definitely more strength around the Middle East, India, some of the emerging markets, pockets of Asia. EMEA, we continue to see pressure there, and the long-term dynamics of where is the industrial base progressing in Europe. Still pretty bullish about heavy industries and automotive industries within the European markets. But there is pressure long term on where is the industrial base progressing in EMEA, with opportunities to introduce new technologies, applications within the markets, and see more upside within the Middle East and some of the emerging markets. Kind of going to automation a little bit, you know, we've talked about it somewhat, but you've talked about the TAM, I think, as a $35 billion-plus market. Now, what does that include, and what's the TAM of the areas that you're currently exposed to? Yeah so, you know, we talked about, I think in our first quarter call, the mix of business within the automation space, and you've got the, the arc welding, the cutting, the laser, but you also have the, non-welding parts of our automation business that have been growing. So we're split currently between 55% welding-related types of applications, and then 45% it gets into material handling, AGVs, for example, end-of-line testing and other capabilities. So when we think about the $35 billion TAM, our team has framed up opportunities to not only drive organic growth with continuously broadening out, broadening out our capabilities, but that also provides a lot of fragmentations in looking at acquisition opportunities. When you think about acquisition opportunities, you've seen our history, a lot of $50 to 75 million types of size businesses or integrators that fit well within our bolt-on strategy and automation. And so we think about that TAM as framing up a lot of opportunities, broad-based, core welding, some of the periphery and other applications that tie into that, and material handling otherwise. You know, I asked an earlier question on, on our automation margins, but just kind of building on that, obviously, your target's mid-teens. You know, within an automation project, how much is Lincoln equipment versus outside equipment, and how does that impact your margins there? Yeah, so that's a great question. We get that quite often. So we estimate about 80% of all the content within a project is from Lincoln source materials and the Lincoln internal sources. So when you look at the mix of robots and other components that we source, those aren't the drivers to the margin profile of our business. It truly is, what is the value proposition for the project? How well are we quoting? What's the engineering content? How are we executing on those projects? But that's not a driver to the margin profile of our business. Is there opportunity to expand that? Are you interested in expanding that, that 80% to a larger component? That hasn't been a focus strategically. I mean, what we think is there are opportunities because of our internal content and looking at how we're sourcing materials, you know, how well are we executing to our engineering estimates. So that helps shape the long-term view of the margin expectation within automation, but it just gives you a sense of it's really a Lincoln-driven type of opportunity, not driven by other sources. You mentioned within automation, you know, the welding component and, and the non-welding component. You know, do those growth rates differ? And when you're delivering a larger project, are you usually delivering, you know, both aspects of that? Yeah, I'm not aware of anything significantly differentiated between looking at material handling opportunities. They're extending off where our customer needs are. So it's driven by the growth rates of our customers. We know what are the investment expectations from our customer, and when we gain the confidence in being able to execute on a pretty higher risk type of projects that can get into the tens of millions, then you continue to build out the capabilities and offering that drive productivity, efficiency within our customer base. So it's truly about broadening our footprint within our customer base and gaining the confidence to extend into other areas of automation within their business. You know, you guys have taken a kind of a differentiated approach to automation than some of the competitors. You know, how is the competitive environment within the automation specifically? Yeah, so when you think about 80% of our business being in the Americas, the North American business particularly is much different than the international markets. The North American market is driven by a lot of small, mid-sized in-integrators, and those are opportunities for us, as you've seen from an acquisition standpoint. Versus when you think about the international market, you see a lot more of the robotic manufacturers, much more into in the integration process internationally. The Fori acquisition, as we mentioned, couple years ago now, provided additional access into the South Korean, the Indian, Chinese markets. That's an opportunity for us to drive growth. We've also acquired businesses which are specialized into automation, like the Zeman acquisition we've done. So the international market space is different, and we're focused on opportunities to grow through either specialized automation capabilities in cutting and structural fabrication, versus looking at some of the integration processes in different parts of the markets, but it's a different market space in international, an opportunity for growth. Maybe let's just switch and talk about the charger initiative a little bit. Expectations for those revenues have been pushed out on different technology asks. Like, do you think the technology changes here are going to continue to be challenging, continue to kind of mix, you know, differently than expectations? And then, does that make it... is this still an attractive market for you? Look, in terms of attractiveness, it's for us, it's a low investment, low cost, high upside. It's early stages in the market's development, and you've seen a lot of disruption. Seen some of the recent announcements for some other players in the market, just have to do a lot of retrenching in what they've seen. We've developed our product offering into the NEVI specs, very much focused in the U.S. market. A lot of our customers see our product as attractive. We've launched it, but they're starting to move into more capacity, more charging capacity. So we've taken our modular approach, which is a fifty-kilowatt modular design that ties into a hundred and fifty kilowatt NEVI design, and now have to reposition to get into a higher level of charging capacity to three hundred kilowatt or four hundred kilowatt. We see that regrouping necessary to be able to tie into where the market is going. A lot of disruption in the market, but it's, for us, it's a lower cost opportunity. We've developed the products. We continue to broaden our offering. The operating model is pretty much set. We're developing capabilities to commercialize and engage in the market. We'll continue. We think there's a nice opportunity for us. Thinking about some of those kind of high-growth opportunities, low investment, you know, additive remains pretty small, but you talked about some enthusiasm- Mm-hmm. From customers on the last call, so you know, what's that long-term opportunity, and what does that look like over the next several years? Yeah, so we got a lot of interest on the additive side, particularly on the energy markets and military as well, and that's all about significantly reducing the supply chain for our customers there. But it does go through a lot of coding, standardization, industry review, and specifications that need to be tied to what the requirements are. But we're excited about it. We're starting to turn the corner on that, and we had talked about the $6 million operating investment over the years per year. We're looking to break even. So as we're starting to develop reliable, consistent revenue streams, starting to get to a point of break even, and we believe that we're at a point where depending on where the energy and the military markets go for us and the customer base and investment, that could be a nice growth trajectory over the next couple of years. You know, acquisitions are expected to add 3%-4% to top line over time. I think you framed this as a $60 billion TAM opportunity. You know, what does that include, and how does that pipeline look currently? Yeah, so, you know, we've been pretty active in acquisitions. We've had three in the last few months. That $60 billion TAM is split between the $35 billion we talked about on the automation side and $25 billion in core welding. And we think a lot of opportunities for acquisitions on the automation space when you break, peel the onion, as we just went through on the automation side, but also in core welding. You know, the Vanair transaction that we just completed is part of that. So when you take out the large three players in the welding industry, some of the regional players, there's a lot of fragmentation still within the core welding business. That all shapes on how we think about the opportunities to continue to drive 300-400 basis points of CAGR from an acquisition standpoint. One of the things we're doing is we're asking all of our companies about some of the policies. Obviously, it's a U.S. election year. We're not asking you about candidates- Mm-hmm. But, you know, maybe think about a little bit, you know, some of the policies that have been out there. You know, what's beneficial to Lincoln? What could be a little bit less beneficial? Yeah, so we like to emphasize is no matter what administration is in, we'll have to navigate whatever policies there are, and but we're anchored on the long-term themes, whether it's a labor dynamic and welding, welder shortages or nearshoring opportunities or onshoring opportunities. So, we'll continue to manage our business no matter what policy drivers progress and really think about the long-term themes for growth. You know, we talked a little bit earlier, right, about some you know, customer cautiousness and maybe you typically see that around election year. But we're asking when we ask this to companies, they're like, "We're focused on long term." So, and like, is there anything that you're doing today that you're kind of holding off from an investment standpoint, as you think about, you know, what a different candidate could mean in the US? I'm really not focused on the candidates. Mm. been really thinking about what are the long-term drivers for growth and investment. Confidence in the economy, obviously, that's a big driver, and in the short term, you have the implications on the cycle, but you also have in the long term, what it means in real capital investment, whether it's change in interest rates or just general confidence in the growth trajectory in a lot of the end market streams. So it's, we look to the confidence that the industrial private community has in building out capacity, and that will trigger more investment on the capital side and give more confidence in the short cycle. And then, I guess, last question, you know, what's one of the most misunderstood parts of Lincoln Electric, that investors or sell-side have? You know, I think what you've seen in our industry and in our business particularly, is how much technology is embedded in our offering. In our core welding, when I mentioned the Vitality Index and the kind of development that's feeding our productivity and quality within our offering, and then think about the leverage opportunities we've had with EV chargers and additive. It's all about technology and our capabilities. So it's a higher technology type of industry in our business. We're leveraging capabilities with the key differentiators we have, whether it's power electronic-