All right, perfect. Well, thanks everyone for joining us. My name's Adam Seiden, and I lead the U.S. Machinery and Construction franchise at Barclays. For this session, we're really thankful and happy to have the folks from Lincoln Electric here. So joining us from Lincoln is Steve Hedlund, CEO, as well as Gabe Bruno, the Chief Financial Officer. Good morning. Good morning. So the presentation style here is actually gonna be a fireside chat, a format of this, sessions of fireside chat, between myself, Steve, and Gabe. We would, though, of course, invite your, you know, participation, and there will be a mic runner around the room. If you have a question, feel free to raise your hand. If the mic isn't your style, we will be doing our audience response system, which will be done through the remotes that are sitting on the table in front of you. And that will be done sort of towards the end of the chat here. So, with those ground rules out of the way, Team Lincoln, thanks so much for being here. Oh, thank you for having us. Thank you. Well, you know, so here you are, you know, same, you know, same Steve, new seat, you know, same company. So, you know, you had about an 18-month tour or so, you know, in the COO role prior to, you know, CEO, you know, and clearly had a very instrumental role in forming the 2025 strategy. So when you think about your vision and where you are, you know, how do the areas of focus, you know, either align or are disaligned versus where, you know, the company's been in the past? Okay. Well, as you mentioned, Adam, Chris and I worked together very closely defining, developing, and then implementing our higher-standard 2025 strategy. If you look at where we are about halfway through that strategy plan period, we are achieving or on track to achieve all of the targets that we've identified for investors. So we're very confident in the strategy we have. We're very confident in our execution of the strategy, and we're very confident in the team that we have to drive the business forward. So over the next two years, you'll continue to see more of the same. We expect to make more progress in improving the margins, particularly in automation and in the international part of our business. But don't sleep on the Americas or Harris either. We see lots of opportunity to drive incremental growth and margin expansion in those two businesses. I just note, if you look at the Q4 of this year, the Harris business was down on headwinds in the retail and HVAC sector of the business, but their margins were up 300 basis points, which reflects both some favorable mix but a lot of hard work by the team to improve the operating performance of that business. Well, that's a good segue then just to talk about some of those, those strides you've made. Yep. So if you think about, you know, you think about on that, there's been a number of, a number of areas that the company's called out, whether it's been the, you know, the shared services center. And then also on the call, I think you referenced centralized global procurement. Yep. I hadn't heard that before. Can you maybe talk a little bit about, you know, some of the things that you've done, but then also on the procurement side? Sure. So Gabe has been very instrumental in leading our effort with shared services to try to, you know, consolidate a lot of the administrative functions of the business, and to move those to lower-cost countries, or to automate those through chatbots and things like that. And that's had a very nice impact on our SG&A cost and SG&A leverage for us. On purchasing in particular, we have historically purchased some of our direct materials in a global fashion. So we have a group of people that buy steel for us around the world. We have a group of people who buy chemicals for us. But the indirect portion of our spend has been largely localized to date. And so what we are adopting, I guess the current term in vogue is center-led instead of centralized. Got it. We are trying to extract more leverage out of our purchasing spend globally so we can get both better pricing and better terms from our suppliers. The new purchasing lead is about to hit his 100th day in office, and is laying out his plan to drive those savings and improvements for us. I expect we'll capture some of that in 2024, but the bulk of it probably to come in 2025. Got it. Well, hitting his first 100 days, so now he has some deliverables. Exactly, exactly. The honeymoon is, coming to an abrupt end. That's right. So when you think about one of the things that I like to do, especially at a conference like this that's pretty broad, is just get a gauge of sentiment across different areas. When it comes to Lincoln, you know, certainly a company that has a lot of diversified exposure, some that's been really helpful for you guys over the last couple of years and months even. But you know, maybe to ask you, you know, how has the conversation changed or not changed, you know, over the last six months among some of those end markets? Sure. As you mentioned, Adam, we're very fortunate to have a broad, diverse exposure. When we look over the past 12 months or so, we've been particularly happy with the fact that the capital side of our business has been very resilient. So that's the automation and standard equipment side of the business. Despite the declining macroeconomic indicators on industrial production and PMI, despite the higher interest rates, we see our customers continuing to invest in driving productivity and quality improvements in their business. It's been more the short-cycle part of our business, consumables, that have been a little choppier, right? So we referenced the retail headwinds have been something we've had to overcome. We start to see a strengthening in at least the macroeconomic indicators for general industry, at a time when some of our larger customers in the ag construction equipment space are now anticipating a slowdown. It's a little early to see how that's gonna play out, but we're cautiously optimistic that we're gonna see an acceleration in the general industry part of our business, which helps both consumables but also some of our equipment and automation business as well. Got it. Gabe, do you have anything you wanna add to that? Yeah, no, that's our posture. I mean, you've seen what we've done. You know, historically, we've been known to be short-cycle, and we've just made a tremendous investment in broadening out the long-cycle type part of our business. And I think that's what you've seen differentiate us over the last 12-24 months. That automation footprint we continue to build on provides that long-term capital investment cycle. So I think we've got a very nice balance between long-cycle and short-cycle. And I think that's what makes our investment in Lincoln pretty exciting. That's fair. And automation's certainly a focus for you guys. And I just wanted to actually dig deeper on the general industry side. So if you think, you know, automation, as you guys have become more diversified in terms of where you serve there, you know, it certainly can impact on a quarter-by-quarter basis, because of the lumpiness of that. You know, some of that does fall in general industry. So just, what was the underlying growth within general industries or underlying trends, I should say, within general industries that you saw, and how is that different, or not versus, you know, the prior capital quarters there? Yeah, so just to add, so if, if you pull out the automation impact, which we had strength, as you saw, in general industries, our general industries would be down to low, low single-digit type of growth. And that's important for us for a couple of reasons. One is broadening our footprint of where we introduce automation solutions. We've been very intentional about that, introducing a Cobot into small, mid-sized fabricators. But also, you know, how do we monitor and progress core welding business? And so. Still pretty healthy at the low single digits, but certainly an impact on the growth of, of automation. Same dynamic with heavy industries, right? So when you g when you pull out the automation impact on heavy industries, we're probably in the mid-single-digit type of growth. A very meaningful growth trajectory in automation, but pretty healthy still in some of the core areas of our business. Got it. Now, so now when you think about the 2024 guide and so forth, I think in the transcript, I got it, it felt like conservative. I think even maybe it was mentioned a few times out there. So, when you're looking at that, can you explain just, you know, where those areas of upside may potentially be, you know? And then, you referenced consumables earlier and so forth. So how does, you know, how does the volume portion of your organic growth guide, you know, split between consumables and equipment? Yeah, so I would, Adam, emphasize what we have in line of sight for, right? And so when we talk about a low- to mid-single-digit organic assumption for 2024, really, the midpoint is 50/50 volume, price. That volume trajectory is anchored around various increases in our automation business. And as we see progression in the general markets, short-cycle, it will. You'll see it first in consumables. You also will continue to see it in standard equipment. So I think we're pretty conservative in starting the year. It's a long year ahead of us, but wanna point to things we have visibility to, and that's largely on the automation side. Got it. So just looking at automation, assuming. Yep. That all sets. Got it. You know, so I wanted to ask a follow-up on that. We'll move on. Though on the new product side, if you think about, you know, you think about new products, it's always been a key contributor for the business. When I, you know, when I think of the slide decks that your team puts together, the Vitality Index is always all over it. So, you know, when you think about this year, is there a lighter or heavier year of new product introductions? And then also just longer term, I'm curious, like, what is the growth curve typically like for a new product, in terms of seeing the ramp in sales? Yeah, so it's interesting, Adam. It differs quite a bit between the equipment and consumables side of our business. What we typically see is for new equipment, there's a ramp-up in the first two years of the product being in the market. But by the time a product has been out five, six, seven years, you see it starts to get generally long in the tooth. Now, there are some exceptions to that in sort of niche applications where you've got a highly differentiated piece of equipment. But if we think about the type of equipment that goes through the distribution channel for general industry applications, it's important that you have a fairly consistent product refresh cycle so that you can maintain momentum in the market. We launched 51 new products last year. If you look at the Vitality Index for equipment, I think it's 57% of sales, equipment introduced in the last five years. We wanna keep pressing the accelerator on that. We wanna keep bringing innovation and new features and new functionality to the market. It's a way for us to drive the replacement cycle on equipment, to get customers to upgrade the existing equipment they've got in their fleet. And secondly, it gives us something to talk about besides price 'cause we don't like talking about price. Yeah. Adam, I would just add that 57% consistent with 2022. We just updated our investor deck with those figures. So 57%'s consistent over the last couple of years. Got it. Got it. So maybe this almost led to the follow-up, but, when you think about, could, you know, when you think about consumables, I mean, it seemed like, you know, consumables, consumables could be up in North America, I think from the transcript. So, you know, is that similar broadly across the international regions as well? The international region really is location-specific, right? So the European business, I think, has been challenging for every industrial company. The energy policy and a lot of the other things they're driving in Europe is not, you know, the most conducive environment to people wanna put capacity expansions in place. Middle East has been a very robust market for us. There's a lot of investment in oil and gas infrastructure there. Southeast Asia's been very strong for us. India's been a great market for us. China never really came out of the post-COVID period the way that a lot of people expected it to snap back. So it's been a little more choppy market for us. But on the whole, you know, across that whole portfolio, we're very excited about the international business. Got it. And you teed me up by saying that, you know, you don't like talking about price. So now I have to ask you a question about price. It's just, you know, right? Walked in walked into that one. There you go. So, you know, essentially, when you look at, you know, the pricing strategy of Lincoln, you know, is that simple? Price-cost neutrality is what you guys are after? Yeah, that is our goal, is to be price-cost neutral at the margin level. So we price for material inflation or labor inflation plus our margin on it. We don't want inflation to be dilutive to the business, and so that's been the posture. There'll be quarters we're slightly ahead, slightly behind based on timing, but that's what we shoot for overall. And then driving margin expansion really through operational discipline in the factories, introducing new products, driving our commercial teams to promote those solutions in the market. That's where the margin uplift comes from. Got it. Adam, I would also add that when you think about us long-term. Yeah. Pricing is in that 100-200 basis points type of impact on organic growth. The updates we provided the market last week, and strategically our progression around sales growth, we cap the pricing at 2%, right? So that growth is actually more accelerated when you add the full impact of pricing. But our team recognizes that over the long term, that 100-200 basis points is a normalized view of pricing that we should be thinking about. Yeah, I saw that little asterisk on your recap slide, which is, I think commendable actually 'cause, you know, a lot of folks would just take that and run with it. You take the credit for it too. So, you know, on maybe the shorter-term side of price, just, you know, to put a fine point on it, you know, within Fori, there had been, you know, some of those contracts, I believe, needed to be rebased. So when you think about the contribution, that 50% of that organic growth being, you know, being from price, is that included in that number, or is that on top of the Fori pricing? Yeah, so pricing was a key lever for us to improve the Fori business. As you mentioned, we inherited a lot of contracts that didn't have appropriate inflation escalation measures in them. But when we think about price, we don't track any price in the automation business 'cause it's all project to project, bid to bid. It's the price we report is all in the core business inherently of legacy products that we're selling from one period to the next. Got it. So, you know, when you guys lay out a nice slide of all the successes, and you've had tons in the, you know, in the 2025 strategy. You know, to play devil's advocate for a second, when I look at yeah, right? It's like you're gonna go that way. When we play devil's advocate, you know, the spread between the Americas and the international business hasn't narrowed all that much. So while the margins are definitely going up and hitting that range, the spread is kinda going up, kinda moving with it. So, you know, how do you guys look at that? Is that something we should expect to see narrow between the segments, sir? Yeah, that's a great question, Adam. Part of the challenge is the Americas welding margin is a moving target, right? We're continuing to drive profitability in the Americas business. Part of that is improving automation 'cause about 80% of our automation sales are reported through the Americas segment. But a lot of it is just good, solid progress in the core business in the Americas. So while International has made progress, right, they haven't necessarily closed the gap 'cause Americas keeps moving forward, you know. Will International ever get to the Americas margins? No, I don't think so. The market structure and dynamics are different in the two markets. And so we see that there will always be a difference between the two of them, but we're trying to get both businesses to perform as best as they possibly can. And then again, don't sleep on Harris 'cause they're making a lot of progress there as well. Okay. Yeah. And so moving to automation a bit, you know, the company's just shy of, you know, about the billion-dollar mark, after seeing some good growth in the past year. So, where is the mix now of the automation portfolio versus where, you know, where you think it needs to go? It's broad-based, right? I mean, we've been very intentional in looking at how we accelerate growth through introducing solutions like cobots into small, mid-sized fabrication upwards to $15-$20 million pro-projects that are pretty complex on the industrial base. So, when you think about, you know, where we started the year with, the acquisition of Fori, I mean, we had leaned a little bit more on the automotive side. We ended the year 45% automotive, 25% general industries, and the balance into heavy industries and structural fabrication. So we've got a very healthy mix, and our footprint is broad to be able to provide an automation solution across various industries. And I think we're very well postured for that. Got it. And on the short-term side, it seemed like, you know, the quoting activity was pretty good. It's, you know, it's elevated today. So, you know, how reliable is quoting activity to turning into orders as a whole? Yeah, that's something we track very carefully, in terms of really being able to plan the capacity of the business, going forward. And there is a fairly consistent relationship between if I quote X amount of business in my pipeline, you know, Y is gonna translate into orders. So we haven't seen a significant change in that over the last couple of quarters. And, as you referenced, the quoting activity continues to be very healthy. Got it. And certainly, you have your aspirations in automation to get that to mid-teens margins. Correct me if I'm wrong, but mid-teens margins. You know, just so we have the starting point of where we are today and then I guess we should say the starting point of years ago, just where did it come from, and then where is it today, and how to that path to get to that mid-teens. Yeah, so let me start off with where we ended in 2023. There you go. Low-teens type of EBIT. And that includes the Fori business. So if you remember, we started the year with Fori being the low double-digits EBIT profile. So we're very pleased with the execution of our automation business to be able to complement Fori business plus core and still achieve low-teens type of EBIT profile. So we have a clear line of sight of achieving our mid-teens type corporate average EBIT profile. When you go back to the 2020, 2021 time frame, we're talking about a doubling up of the EBIT profile of our business. And we've done a lot of structural work, a lot of work around our business systems and practices. We have the teams really done a really nice job of bringing it all together, so we continue to grow on our platform and drive our EBIT profile that's in line with our corporate average. Got it. And you gave us the helpful mix of what the automation split is, you know, by end market and so forth. I know we love all our children, per se. But, you know, are there some that are growing a bit faster than others? And then more so, I guess, from the profitability side, is there, you know, are there areas that are a bit more, you know, financially beneficial for you guys? It, it doesn't vary quite so much by industry segment. Right. As you might expect. One of the things that we find is repeat business is great for us, right? So if a customer asks for a custom-engineered solution, the first time we do that, there's a lot of engineering work up front, in making that system work. When they start ordering multiple copies of the same thing, that's when the business gets really, really attractive. Got it. Got it. So maybe we'll go into actually, let's do Harris, and then we'll go into the, the, the questions here. So, on Harris, I, you know, I one thing I'm gonna take away from this conversation is don't sleep on Harris. So, could you maybe walk through a little bit of, you know, some of the things that you're seeing within that business as far as the ability to push that forward, you know, I guess, longer term, but then the shorter term, some of those bottlenecks that you guys have called out in the past; are those alleviating? Yeah. So I think a lot of the progress that we've seen in the Harris business, one is on the gas equipment side, which is industrial valves and regulators and cutting torches. We've started expanding that business into specialty gas applications for hospitals, research labs. So moving outside of our core industrial customer base but leveraging the competencies we have in gas flow and metering technologies. So that's been a great profitable growth avenue for us. We did a couple of acquisitions on the brazing side of the business to start to move a little bit downstream in serving our HVAC customers with fabricated parts and components. We've done a lot of work to restructure that business and move production to lower-cost countries. We see a lot of just good progression in the basic operation of the business that should enable us to continue to grow and expand margins. Then to the degree that the U.S. consumer and the HVAC market comes back, you know, that's just further tailwind for us. Got it. All right. So let's shift into the audience response questions if we could. So to participate, please, there's a remote clicker on each one of your tables there. Do you get clickers? No, no, no. Do you currently own this stock? Yes, overweight, market weight, underweight, or no? I think once the clock comes up, if you click in. Sorry about that. There you go. All right. Opportunity. Moving to the next one. What is your general bias towards the stock right now? Positive, negative, or neutral? I think once just going forward, when the clock goes, then just click in. All right. About 70% towards positive. Very good. So, again, I've seen this in other sessions as well. Not owners of the stock, but for positive. So really potential opportunity. Yeah. It's great. Moving along to the next one. In your opinion, through-the-cycle EPS growth for Lincoln, will be above, in line, or below peers? All right. There's that clock. All right. A bit above. Next question. In your opinion, what should Lincoln do with excess cash? This is Gabe's question. Bolt-on M&A, larger M&A, repos, divvies, debt paydown, or internal investment? Don't disappoint Gabe, guys. We just gotta try and remember now what each number quarterly is. Yeah. All right. I agree. Yep. There you go. A little split between M&A and internal investment. That, that is our capital allocation strategy right there. Internal investment, bolt-on M&A, and then returning excess cash to shareholders. You got it. It's a very, very balanced. Yeah. Moving to the next one. In your opinion, on what multiple of 2024 earnings should Lincoln trade at? And it ranges from less than 10x to higher than 21x. Again, these are standardized ranges for the conference. Just gotta start that clock. There you go. Nice. All right. All right. More towards the, the, the higher end of the spectrum. Let's put it that way. All right. Moving to the next one. So what do you see as the most significant share price headwind facing Lincoln? Is it core growth, margin performance, capital deployment, or execution strategy? All right. We should do an executive test on this before I match it up to the audience, see how it works out. Yeah, that's right. All right. So it's about 60% on the core growth side, about 40% margin. But I guess probably more standing out is that, there's no one that's at capital deployment or execution and strategy. So like you said, capital deployment, you know, very, very well balanced. Over time. So, or even on a year basis, to a degree. Let's talk a little bit about M&A. So, you know, as far as automation, you know, automation has been that fertile ground where you've. You've done some acquisitions there. You know, are there examples of places within the core welding portfolio that also, you know, could potentially attract, you know, more inorganic investment as well? Yeah, I think in the core business, the investment opportunities for us are geographic. So building our presence in markets where we feel like we have good traction but would like to accelerate that. So India's a prime example of that. And then there are also a few product categories we'd like to bolster our competitive position in portfolio in. For example, cored wire or plasma cutting would be attractive investments for us. So we continue to be very active in all segments of the business. We look at a lot of automation opportunities. That just reflects the highly fragmented nature of that market, and the fact that there are a lot of properties that have reached a point in their growth curve where they feel like there's a better owner for the business than the current owner. But we continue to look at a lot of opportunities in Harris in the core welding business as well. Got it. And thinking still about capital deployment and really more so on the free cash flow generation side. So, you know, from a working capital perspective, certainly it looked like you made a bit of progress here through the year. So maybe if you could just talk a little bit about, you know, as far as what helped drive that and then, you know, essentially how we should be thinking about free cash flow. Yeah. Conversion and so forth section. Yes. You know, our target's to be at that 15% top decile performance. And what you've seen over the last year is progression back to where our posture has been in working capital execution. We intentionally elevated inventories, part of our customer-first type focus. And that's just a lot of discipline surrounding sales, inventory operations, planning, the use of the tools. You know, we have one instance of SAP, for example. So the team's just having the discipline of understanding demand patterns, looking at where we can optimize inventory positions, and then just a lot of discipline. And so we're very focused on that longer-term target of 15%. You saw a very healthy progression this year. And so we'll continue to look to a continuous improvement philosophy in optimizing our working capital position. Excellent. Maybe to wrap up here, I did wanna ask a question on some of those long-term growth initiatives. So. You know, both additive manufacturing and fast, you know, fast charging. I guess the first point is essentially, what milestone should we be looking at for both of those in terms of seeing measuring the growth of that? And then from an investment side, just remind us, you know, the amount of investment that requires. Yeah. So, let me start with the latter. The investment has been very modest for a company of our size and market cap. We invested about $15 million in the EV charger initiative, but that was largely in capacity in our electronics factory that also feeds the welding machine business. And really, that was to avoid ever becoming capacity constrained and having to choose between selling a charger or selling a welder. We didn't wanna be put into that position. So the capital investment was very modest. A lot of the assembly operations are using existing factory that we have in Cleveland. And on the additive side, it was investments in basically welding robots that we sell to everyone else. Our additive business is basically using a welding robot as a dot matrix printer. There's a huge amount of software that makes that work. That gives us, we think, a very differentiated and proprietary solution in the market. To the first part of your question, we're now seeing very strong interest in additive from the defense industry and from the energy industry as a replacement for large castings. So pump housings and the like where, if a part goes out of service, it's 8+ months to get a replacement. And they just can't afford the downtime to do that when we can give them a solution in 8 weeks or so, right? Not very price-sensitive customers because of the tremendous value creation opportunity there. So we feel like additive is on the cusp of making a breakthrough from a commercialization standpoint. And then on the EV charger side, we're just working through the product validation and testing requirements of all the customers that we're talking to. They, they recognize that this is a pretty significant capital investment they're making. They've been burned by some of the choices they've made in the past. They're just being very conservative in putting us through our paces, before they'll declare the product to be a fit for service. We're just working through that process with them, and we'll continue to drive that forward. There you go. We'll, we'll keep watching it. So with that, I wanted to thank the Lincoln team for being here today. Let's give them a round of applause. All right.