Okay, perfect. Thanks everyone for joining us today. So my name is Angel Castillo. I'm the Morgan Stanley machinery analyst, and it's my pleasure today to have Gabe Bruno, CFO of Lincoln Electric. So thank you for joining us, Gabe. Thank you, Angel. Thank you for having us. Of course. So before we get started, I just wanna read a quick disclaimer. "For important disclosures, please see Morgan Stanley Research Disclosure website at www.morganstanley.com/disclosures. If you have any questions, please reach out to your Morgan Stanley representative." And I do wanna remind the audience, you know, if you have any questions, I do want this to be informal, so by all means, just raise your hand, we'll get a mic to you. But, you know, before that, we'd just love to start, Gabe, with overview of Lincoln Electric. So- Sure. for those that don't, you know, know the business as well or aren't as familiar, just- Yeah love to start there. So Angel, thanks. So we are the global leader in arc welding, and we're also differentiated by having the leading platform in automation within the industry. So we like to lead with technology, so you hear us emphasize the broad portfolio of products and solutions, very much focused on the technology and the growth of our business surrounding solutions. We've got elements in our strategy that are focused on growth. When we think about growth, we think about organic growth and how do we innovate and differentiate our solutions, and then we also think about shaping our model throughout the cycle. So you've seen us consistently expand the operating margins of our business in a very healthy return on investment, capital type of focus. So market-leading growth, innovation, solutions, and into our margins and returns as a company. Great. That's very helpful. And, you know, one of the areas that we've been getting at least the most kind of questions has been some of the comments you made last week. You know, obviously a tough macro environment. So I won't make you repeat it all over again, but I did wanna, you know, hone in on some of the aspects of what you discussed, right? Because I think what was a little bit more surprising to me, or maybe it stood out, was you made some comments about perhaps some customers indicating that twenty twenty-five, you know, don't expect any change from the current levels. One, that's interesting because you have a short cycle consumables business where the role of visibility tends to be pretty limited. So even just that degree of kind of, you know, indication was surprising to me. But just broadly, you know, what is your customer... One, where are you hearing that? Who is, you know, if not who, what end market are you hearing that in? And just, yeah, if you could talk about that dynamic. Yeah. So think about, you're right, about 80% of our business is short cycle, and that's standard equipment, that's consumables, largely. And the visibility we have generally is from what we see as incoming orders, activity levels, plus the level of insights we get from our customers, and we've got a pretty broad-based commercial team and industry segment leaders that are working within the markets to give us insights on what are our customers saying. And then, what you see and what we see in the marketplace and what are our customers saying about their own business? And so the comments that I made last week were areas that we know that there are extended destocking or actions that are going on, particularly in heavy industry that our customers are telling us it will take some time to work through that. So expect that kind of profile. And what we would look at short cycle business consumable activity within their own production cycle. So it's based on the visibility that we have. Our heavy industry consumables activity was down, low double digits in the second quarter, and so we just expect more of the same, and we don't see that dynamic changing based on those insights we've got from customers. Within heavy industry, is there a particular end market, that is kind of pointing to that or indicating that more so than others? Yeah, so it would be largely driven by ag, to a lesser degree, construction, but largely ag. Okay. Maybe just to that note, you mentioned construction. Are you seeing the messaging from customers there evolve or change in any manner? No, all of our updates that we provided last week were more of the choppiness, uncertainty in what you see short cycle demand, so it's more of the same of what we saw in the second quarter. But we saw a little bit more pressure in demand within short cycle automation. Mm. And also decision points on capital investment on the automotive side of automation. So we estimate about 15% of our automation business to be short cycle. This is like cobots or pre-engineered systems that would be servicing more so the small to mid-size fabricator. And so those were drivers to kind of how we see the automation progression and demand, and then how would that translates into our own business dynamic. So that was the pressure point that we saw the move from mid-single-digit down to mid to high-single-digit down in organic trends. Got it. And that's actually a good segue. I wanted to ask about, so on the automation side, that has more visibility. I think in the past, you've said you have kind of six-month type of visibility versus your short cycle being, you know, much narrower than that. So how is, given these trends, do you see the backlog, is it still giving you kind of six months of visibility, or is it a little more limited? You know, how's that kind of evolving? So the visibility on the automation side is tied to quote to order, and then we have percentage completion, sales recognition, revenue recognition on that once the projects are booked and we're starting to work. So you pull out the short cycle side, what we've seen is the time it takes to quote to order, the decision points have been extended typically around six months to nine months. So that's been key for us in looking at, you know, what's our, the book of business. Our backlog's still strong, quoting activity is still very strong, but we haven't seen that translate into orders. So with that not translated into orders, and you have the timing it takes to recognize revenue on that, that's outside of the short cycle part of our business, but that's generally what's going on on the automation side. What are your customers telling you about, you know, why that quoting activity is taking... You know, why that timeline is? Yeah kind of stretching out? Think about automation being the mix now, 40%-50% automotive, 25% general industry, 30% heavy industry. On the automotive side is the whole decision-making process surrounding: Are we going to continue on with an EV program, some platform, or is that going to change in how we're looking at investing in ICE or hybrid? It's been a pause in the decision-making process across the industry on kind of what direction they're going. We think about the program launches in 2026 and 2027, have a clear picture of kind of where the industry is going, and there's just been a pause in decision-making. We call it an air pocket in that, but we're hopeful that by the fourth quarter, they'll we'll have more insights into where is the industry going, and then the typically up to an 18-month type of trajectory to be ready for those program launches, 2026, 2027. Got it. That's helpful. And again, just want to remind the audience, if anyone has any questions, just raise your hand and we'll get a mic to you. But if not, I want to move forward, you know, with the kind of actual updated guidance, right? So you talked about, I think, decline of mid-single digits, high single digits on an organic growth basis. Can you just talk about that range of outcomes? Like, what are, what are you kind of contemplating, you know, at the low end of that, at the high end of that? You know, you mentioned maybe more of the same of what we've been kind of seeing, but how does that kind of differ within that range? Yeah. So core welding, the activity, we saw that it's been more the same, a little bit more choppy, always difficult coming out of August to get a clear picture, kind of where the demand curve is going, particularly in markets like Europe. The vacation schedules, the typical shutdowns that are planned during the summer month gives a little bit of unclear picture as to real demand activity, but enough for us to say what we've seen with short cycle automation, some of the lack of decision-making on projects and that within automation leads us to move slightly from mid-single digits down. And if my comments on our second quarter earnings was that, we thought that would be on the higher end of the unfavorable range, which implies 6% or so. So we moved that slightly because of those dynamics and what we're seeing in our business and not having the conviction that we're actually turning into a more positive trajectory. Got it. And maybe just to kind of pivoting to a little bit longer term, right? So kind of putting all this aside for a second, you have a new CEO, and you're coming up on the end of your kind of typical five-year plan that you tend to lay out, right? So we were talking about, again, pretty good, pretty good performance historically there. So I'd imagine, you know, internally, you're working on a lot of that kind of next five-year internal planning. So I'm hoping you'll, you know, front load or front-run all of that and give us an insight into it. But yeah, if you could just, you know, talk about your portfolio that you have today, the capabilities, you know, to deliver on the next five years. Is it something similar to what was laid out in terms of continuing that CAGR of growth? Any step changes as you think about versus this, you know, current five-year plan? Just, you know, early insights into it. Okay. Well, you know, our CEO, he's new in his role, but he's been with us for a long time. Right. He's been in strategic roles. He's been leading our businesses. Don't be surprised if we're emphasizing growth as we have been, and the growth means we're going to lead with innovation, technology. We're going to continue to align with the accelerated growth trajectory of automation, organic growth. We're going to continue to look at acquisition. We're postured to continue to drive growth, and on top of that, an acquisition strategy that will yield 300-400 basis points of CAGR, and you've seen us do that more or less the same. This year, we just closed on three acquisitions, so we'll continue to have that. We're ahead of that CAGR in the current year. We'll continue to look at shaping our operating model. Mm-hmm. You've seen historically, we've been consistent throughout every cycle of expanding our operating margins, 200 basis points. We continue to see opportunities on automation and international, and some of them, as you've seen us do, some of our sensor-led corporate initiatives. We just brought in a Chief Procurement Officer who's leveraging capabilities across all of our segments and buying direct materials. Indirect materials, we see that as an opportunity. We announced a Chief Transformation Officer that's looking at across our segments, what are some of the best practices and capabilities that we should be leveraging? So think about 2030, probably going to have an emphasis on continuing shaping our operating model. So we have that. And then, you know, we're very disciplined around capital allocation, top quartile type performance on return on invested capital. It's a key differentiator for us. We're going to emphasize growth, organic growth, internal investment in growth, but also through acquisitions. Our priorities are growth and returning cash to shareholders through dividend rate increases. We've increased our dividend rate every year since our initial public offering in 1995, and then we'll return excess cash to our shareholders through share repurchases. But that's the core of how we look at our business. We want to be driving growth. We want expanding our margins and our operating model, and we identify areas, and we continue to drive it. Perfect. And, you know, wanted to touch base on that 300-400 basis points, right? So you mentioned automation. Can you just kind of expand a little bit more of like, you know, what does that pipeline look like? Where are you looking from a, you know, technology perspective? What perhaps might be some, you know, gaps that you might be looking to fill, as well as, you know, international or regional? Is there some aspects that are more of more interest or less interest than others? Yeah. So, if you think about what we've identified as a TAM, that we go after an acquisition, $60 billion, $35 billion on the automation space, $25 billion in core welding. The, on the automation side, very fragmented market, so we think there's a lot of opportunities there to look at $50 million-$75 million dollar-type bolt-on opportunities. When you look at the core welding business, you take out the Big Three and some of the regional players, a lot of fragmentation. So then when you start to shape, what does that mean into our strategy in terms of our portfolio? You've seen in the automation space that we've been building out capabilities surrounding providing productivity, automation, quality within our customer base, and 55% now of our capabilities are tied to arc or laser cutting automation, and then we've got non-welding components of capabilities. So we're gonna continue developing our footprint and providing factory automation. The acquisition we had completed in April was tied to material handling, broadening the offering around AGVs and other manufacturing execution systems. Then the acquisition we had done in June is building out vision capabilities and technology that just complements what we see today and long-term in automation capabilities from a vision standpoint. The acquisition we've completed in July ties into our core equipment business and core welding. So we're looking, canvassing all out different opportunities, make sure it ties strategically, typically bolt-on strategies. It's got to pass through our assessment, where we can create value in a very disciplined way, with returning mid-teens type of, returns in the long term. So that's kind of how we think about it. Very active pipeline is something we constantly are thinking about. Yeah, and I was gonna ask about that. So, you know, to the level of activity, to your point, you've done, you know, several, a number of kind of small tuck-ins. As you think about the appetite to continue to do that, you know, despite the kind of uncertainty in the macro, would you say that that's kind of unchanged, it's not really impacting your degree? Yeah, it doesn't change how we think about it. You know, we're a strong cash-generating business. We've just completed refinancing at the end of June. We've got a lot of flexibility, and we're very focused on the strategy in the long term, so very actively evaluating options in acquisitions. Would you consider something larger, not so much a bolt-on, in terms of the pipeline? I mean, if it made sense to us, we'd look at it, but in general, it's bolt-on type strategy. Got it. Maybe switching over to the organic investments. So one of the areas that I think you had been investing in was the DC chargers. Obviously, there's been a lot of kind of volatility or maybe shifts in sentiment around EVs, right? Mm-hmm. So can you talk about some of those maybe organic opportunities that you're seeing within your business to invest in and to grow again? Yeah. So I'll point to the EV DC fast chargers as well as the additive business that we're developing. So both those businesses, we like to call them incubator-type opportunities, where they're leveraging core technologies with modest, low-level investment, low risk, but potentially high opportunity for us for growth and expansion, and they're accretive to our margin profile. So on the DC fast chargers, one of the important things, and as we've thought through that, there are three elements of our strategy. One is operational, and operational means that we're leveraging all of our facilities, our people, our capabilities, power electronics, to be able to get a capacity level that we can serve the markets and how we define it. And then we've got commercialization, which is how we're working with charge point operators or fleet managers to introduce charging capabilities into the space, and then lastly, the products. So the product design is leveraging core capabilities and power electronics. Our engineering team looks at this as another product introduction, so it's leveraging what we have. But there's been changes in how the market is defining what kind of capacity to launch. So we had anchored on a 150 kW NEVI standard. We've done that, and then the market is saying, "You know what? Not fast enough, not enough power in the long term that we want to anchor investment on." So they've moved that now to more of the 300-400 type kW capability, looking at power distribution as a way to drive more efficiency in their charging operations. So we've had to regroup on that. We're looking at leveraging on what we've done and taking it to the next level of what we already contemplated in building out capacity, and then be able to introduce an updated product offering that would make sense for investing in the long term. So it's leveraging all of our key capabilities without being a distraction to our core strategy to be able to drive, accelerate growth. Same thing on the additive side. The additive side is leveraging our automation capabilities, software, our wire-based drawing capabilities, and then using that as a platform for introducing accelerated growth in large parts, and that's interesting in energy, interesting in the military, and we're starting to see that now develop into a model that was very interesting for us. Both of these initiatives provide us a lot of upside with modest investment, and, the additive side, we're looking to break even. So it was an investment, operating investment, upwards of $6 million per year. Now it's looking to break even. The EV is about... It's more the same. So we can be patient, nurture the development of these capabilities, leveraging our own technologies, and then be able to look at upside, without distracting or being, taken away from our focus on core welding and automation. Core business, yeah. So maybe, maybe, you know, we can switch, use that to kind of switch to the core business, right? So one area that I think about for the Americas Welding business in particular is it tends to be pretty stable, you know, despite or historically has been pretty stable. And also, given the oligopoly kind of nature, you essentially have, you know, pretty strong pricing power. So can you talk about maybe how you're seeing that in this environment, right, in terms of some of the weakness that we've seen in production from some of the customers, heavy industry, general industry, how that pricing power or pricing dynamic has kind of evolved? In the Americas side, you know, our posture is to maintain price- cost neutral positioning. When you look at the overall business, while we're talking about mid to high single digits down organic, we expect overall to be positive on price. So look at 50- 100 basis points positive on price. The Americas side, in the short term, a couple of dynamics that you'll see in the margin profile is, one, the automation mix. 80% of our automation business is within the Americas, and that business, we get higher fixed cost structure. So when we see some pullback on demand, we have higher incrementals on the upside, but also higher decrementals on the downside. So you've got probably mid to high twenties decrementals on top of that, plus the acquisitions that we've introduced within the Americas side, so we'll see some compression. Still very healthy. We're talking about in the short term, in this quarter, next, maybe 17%-18% type range in Americas. It's still very healthy and just walking through kind of the dynamics of acquisitions and automation. In the meanwhile, I mentioned this last week, we're pulling our playbook. The core welding business within the Americas has a variable-based model, and typically, the decrementals there are gonna be in the mid to high teens, so very healthy. And we'll be looking at actions, temporary, permanent-wise, to make sure we're protecting the margin on this downside pressure. But outside of that, very strong business. Yeah. And, you know, the market seems like every other week changes its mind, whether we're going into a recession or having a soft landing. So as you think about, you know, this automation business that has perhaps a little bit of... Again, you mentioned fixed cost absorption or fixed cost nature to it. How does that change the volatility or the variability in your margins? You mentioned some of the decrementals in a recessionary environment versus what we've seen in the past, given that, you know, your automation business- Yeah is growing so quickly. Yeah, so that's an important consideration long term, 'cause we're not gonna do anything that's gonna take away from our long-term positioning. When I talk about fixed cost structure within our automation business, we're talking about heavy engineering, technical content. I mean, that business is driven on a model that's engineering, technical capabilities, and then a broad footprint. We wanna make sure we don't do anything that's gonna take away from our ability to meet the long-term trajectory of growth that we expect in automation. In a short-term cycle, you're gonna see a little bit higher impact because of decrementals, but we'll navigate that. We know how to manage through cycles but without impacting the long-term strength of our model. So that's kind of how we look at automation. In the meanwhile, we'll deal with temporary actions to soften the impact on margins and pull ahead any permanent structural changes we think are opportunities for us. Perfect. Can you expand on that in terms of the cost management? You know, to the extent that you're able to, you know, flex your business a little bit to adjust for the kind of current level of demand, what are some of those initiatives that you're kind of, you know, looking at in terms of managing that price cost, you know, equation? And as we get into 2025, you know, can you quantify or help us understand, you know, what those might be? Yeah. So in general, think about the largest lever to be temporary cost reduction actions, and we've pulled this playbook time and time again, right? We've been in business, and through each cycle, we're managing through the cost levers. So temporary cost actions include obvious things like pulling back on travel and meals, entertainment, and supplies or contractors, and pulling those levers hard. By offsetting some of that discretionary spending, we're gonna offset some of the impact on margins. We looked at the organizational alignment and our variable cost model within the Americas. We're looking at schedules. We've got elements of piece work that are... We have production workers in our 3,000 core business in our Cleveland operation that will look at the schedules and production and see whether or not that aligns, and pull back in real production to meet the demand curve, which translates into reduced costs. So we'll be pretty aggressive on the temporary side. We won't restore those costs until we see meaningful improvement in demand. So we've done this time and time again. We'll pull really hard on the levers. We'll hold line until we see improvements in demand. In the meanwhile, we shape permanent or structural savings, which are part of our ongoing work in shaping our model, and we'll see if we have opportunities to accelerate any actions. That's all part of how we manage through the cycle. Typically, as we exit the cycle and as we reposition strategically, resources, we typically exit stronger. And you'll see time and time again, it goes back to look at each of the cycles, what has the operating margin profile done? Improved two hundred basis points through every cycle. We know how to manage through cycles. Cycles are part of what we do every day, and you just got to manage through that, understanding the trade-offs. Great. And any questions from the audience? Nah, I'll continue, I guess, on that line, I guess. To the extent that... Let's say, you know, January first comes along, the customers that are telling you, "Don't expect any change in 2025," all of a sudden, feeling a lot better about the world that we're in. How quickly can you, you know, get back to kind of providing any kind of, you know, incremental level of growth or production requirements? Look, we're pretty transparent on kind of where we see our business, and we wanna be positioned to drive growth and continuing to shape our operating model. So short cycle, I mean, we have visibility, it's as we just talked about, and it's short, days, weeks. Inherently, there are different components of that when you're dealing by industry. So heavy industry may have a different shaping, automotive, different shaping. But we wanna be in position to be able to capture the demand curve as it improves, and so, we don't wanna sacrifice anything long term for short-term dynamics. Maybe can you talk about. We've talked a lot about kind of Americas Welding. Can you talk about international side? What are you seeing, you know, across the various regions and just also the price cost dynamic as well? Yeah. So on the international side, you know, we like to point to... You know, when we developed the long-term targets in EBIT, 12%-14%, and we've been operating below that.... Is what is our operating model internationally? Well, we believe that our operating model does yield that kind of margin profile, but we need a little bit more demand, some demand, to be able to see modest demand, to be able to get to the higher end of the range. When you look at what has progressed internationally, EMEA has been a pressure point. I mean, just nothing, frankly, exciting in terms of the industrial production trends, the sentiment within the European market, so we haven't seen that change. However, positive, Middle East, India, some of the emerging markets, Southeast Asia, positive. The energy markets have been positive. Some of the project-type works have been positive. So, it truly is a mix between what's going on in the core European markets. Right. China. It's a smaller part of our business, but China hasn't been very exciting either. So pockets of strength, energy, some structural, but, a lot of pressure on the EMEA side and not much to talk about in China. Yeah. And when you talk about EMEA, is that more so kind of the. Is it just the market that you're seeing right now, or also just kind of structurally longer term? I know there's a lot of questions, you know, a few years back, as to chemical production or other facilities, you know- Mm-hmm. Has that become unaffordable in some of those regions, so? Yeah, no, it's a fair observation. I mean, what we're talking about now is more short-term- Mm-hmm ... dynamics, but you do have the longer-term trajectories, like where is the industrial base going in the European market, so something we pay attention to, and so that's gonna put a lot more pressure on to make sure we've got an efficient model in place and, and agile enough to manage through the different, demand cycles. You know, I didn't talk about pricing, but pricing, you saw we had a little bit of a contraction in, in the second quarter. I think overall, I mean, we expect to be price positive. We'll probably end up continuing into a slightly down pricing trajectory in the, in the international markets, and that's just a function of working through OEMs and spot types of, contracts within, the- That's for fiscal year 2024? 2024. Yep, got it. And then maybe Harris, just to kind of round out the businesses. You know, how are you seeing there, particularly as you think about the retail side of the business, what you're seeing kind of in that evolution? Yeah. Harris, first of all, I'm very proud of our team, and then you see how we've been shaping the model there. I mean, we had established a target of EBIT 13%-15%. They were in excess of 18% in the second quarter, but still some pressure on the, on the overall demand. Comps will be a little more challenging, third quarter on the retail side. Consumer sentiment still, not as exciting when you think of the big boxes and what they're saying about their own, consumer profile. More positive on HVAC, so we're seeing a little bit more activity there. It's about a third of the Harris business, so that can lead to some demand, expansion on the Harris side. We're looking at an EBIT profile now between 16%-17% now at Harris, which exceeds our 13% - 15%. We're really proud of the Harris team and what we've done there to shape the model. All right. Just one quick one on the HVAC side. I think that was an area that maybe there was a little bit of kind of destocking or pressure from an inventory perspective. When you say a little bit more, or, you know, positivity there around that business, is it just abatement of the destocking as a demand improvement? What are- I see more of a demand improvement, less about restocking and that destocking, and more so just seeing more activity, more demand. So that'd be healthy. Got it. Perfect. No, that's helpful. And then maybe one last one for me. Anything, you know, as you think about international businesses or just your, your... or even your Americas business, but a lot of going around tariffs or other implications, you know, anything to kind of consider there, for- Look, we'll be very disciplined on how we manage tariffs. We've been through this before. Generally, we put surcharges in place to be protecting our business model and just navigating to whatever we see. So we've done this before, during the 2017, 2018 timeframe. A lot of the talk, we're ready for it. We've managed our teams to understand the implications, but we'll deal with it like we've done before, put surcharges in place to have a temporary offset to whatever tariffs, how that progresses. Any particular way to kind of quantify the degree of exposure to- No, it's, it's anything that we see tariffs on, we're gonna be putting surcharges in place. So whether it's Mexico or China or whatever it is. Got it. Yeah. Yeah. We manage supply chain, so we'll make sure we got sourcing alternatives first. Yep. But then we'll look to, if we got to manage surcharges on tariffs, we'll do that. Perfect. Well, that brings us down to time. So again, Gabe, appreciate, really appreciate your time. All right. Thank you. Thank you, Angel. Thank you.