Illinois Tool Works (ITW) 2 Feb 232022 Q4 Earnings call transcript

Good morning. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the ITW Fourth Quarter Earnings Conference Call. [Operator Instructions] Karen Fletcher, Vice President of Investor Relations.

You may begin your conference.

Cheryl. you, Thank welcome and Fourth XXXX Quarter Good to Call. Conference morning, ITW's CEO, our Michael and by joined Scott Larsen. Chairman CFO, I'm and and Santi; President Senior Vice

During full year quarter ITW's financial today's and XXXX. will year results for full XXXX fourth guidance provide call, we and discuss

you results subsequent detail is refer actual reports could differ the for reminder more filed important our statements. a XXXX risks expectations. cause company's X this presentation with the Slide forward-looking materially from Form about that contains to that We to XX-K and SEC

This presentation measures, is and comparable of reconciliation contained the a measures to most uses certain GAAP release. non-GAAP those measures press in the directly

Santi. Slide call to X, to now it's turn turn over my Chairman the our pleasure Scott Please to and CEO, and

everyone. good and Karen, Thanks, morning,

As in in face our Starting operating strong organic high-quality you delivered a year morning, delivered segments challenges to the with execution XX% top in organic release positive unique we the this finish pretty growth, QX, a was of line as environment. all the some from of saw and Test up was segments X%, & digits, up OEM, and and Products by Auto X%. XX%, and Measurement Equipment, grew XX%, Products Welding, Fluids, of seven Food growth, led up Polymers up up was XX% double XX%. XX%, our Construction Electronics, & five up Specialty up

XX was point XXX Operating quarters. favorable of XX.X%, which enterprise points, first from contribution time basis quarters and for points -- initiatives in margin in price/cost the XXX for nine which basis impact basis expanded with first was favorable margin to nine the time

was including $X.XX negative and $X.XX, of XX% share GAAP XX%. from currency -- growth grew negative divestitures to XX%. gains and income per of operating and XX%, gains was divestiture of a EPS $X.XX, record of margin currency increased excluding $X.XX sorry, $X.XX Incremental earnings

of invested in business, row, prior XXXX, XX.X% return year. an of of $X.XX, the on our delivered the EPS GAAP operating base in company and for after-tax a record margin XX.X% best-in-class all of second XX% capital growth increase the organic versus of year of XX% For

question and throughout decision team's pandemic focus of stay financial no our in the that our strong people it quality and powering enterprise our out are the coming performance, invested recovery is the of strategy when There's the to execution currently growth our our ITW and of then delivering.

are XXXX. result, into with a As and heading we very positioning momentum pleased our

our solid across At to the of Demand Turning chain remains in seeing are improvements question no same and inflation. the there's input performance let's guidance. remained and economic outlook, dynamic. call portfolio, time, our meaningful majority cost that moderating it, XXXX we supply the certainly

EPS for the a slowing of demand to our markets. in on will end of As midpoint detail X% and X% that adjustment at projection and for a result, minute. organic reflect current our guidance Michael certain in provide of risk And growth more further levels XXXX a $X.XX just

Before to executing Michael, excellence. to turn to customers commitment for over their world dedication my our our serving and it ITW again colleagues I the thank and with around strategy extraordinary I want

you. Michael, over to

growth demand this equal to as everyone. year compared growth organic basis, we've and with less day’s that of prior into revenue Thank you, XX% fourth growth as fourth all an X% day had On year. The the Scott, organic good the XX%. was morning, shipping quarter one continued quarter experienced grew year

XX%, growth X%. XX%. into China Europe and geography, of as basis QX our as plus X% XX% momentum We America finished of organic from QX grew our per the up sequential year evidenced with revenue compared historical on By North day a sales up plus major with by region double every to sequential strong digit, growth up

$X.XX grew XX% gain reduced from from and X%. included a acquisitions impact X%, divestitures which a in more GAAP net $X.XX revenue moment. was Foreign plus divestitures, by detail currency two the I'll EPS provide translation and headwind on and to

$X.XX, gains, those currency translation. from EPS of $X.XX foreign EPS headwind to which included increased XX% Excluding

on basis, So, an and currency increased apples-to-apples eliminating gains headwind, XX%. EPS both divestiture

income of XXX XX%, basis bottom XX% with incremental grew margin line, XX.X%. margin improved operating performance strong and On points operating the to

Operating margin the favorable impact XX.X%. impact favorable the said, the third quarter businesses, XXXX. achieved excluding And XX price/cost quarter, fourth of in we base was this margin was since quarter our price/cost from first MTS, margin points. Scott of basis In with as

Enterprise Initiatives XXX basis points. contributed

impact in EPS release, income fourth gain nonoperating press an pretax resulting divestitures quarter, $X.XX. and As a sale recorded we completed you on of saw combined in in the in of million the two $XXX

carryforwards rate tax divestiture By on to loss utilizing taxes the for was the XX.X%. company overall offset capital gains, the

So overall, what remains across board, volatile a performance the for and QX, and excellent uncertain financial strong pretty operational environment. execution

on capabilities. Please front-to-back turn growth. Slide operational growth core progress our executing strategy our to X, to been as with know, Okay. build on starting XX/XX par above-market you organic with strength a And aggressively focused very growth a organic into ITW we've consistent

see growth some left growth As data of on suggesting side the organic ITW's our solid two while we're in that compares X% for progress. of slide, years there XX% to favorably peers the realizing years, both performance, you yet proxy ITW's not can of full potential about we're last the terms from very making each the organic rate at

X% strong car XX% XX%. electric was and growth was were a up Automotive grew was, year. chain year On organic in starting way growth last growth with on led revenue XX%. China with vehicles. industry XX% helped to particularly with in course, up segment full North challenges Automotive builds. growth America up results, ITW Year-on-year XX% OEM, the by the in of Moving the revenues basis, of which supply Europe versus OEM

of a grow to risk-adjusted XXXX single Looking X% X% OEM expect gains auto to forward, typical penetration plus X% in X%. we on low based Automotive assumption build the in our to digits

retail the end major X%, Institutional grew Food Turning International revenue XX% up across softness with strong were strength XX%. X% near-term grew with flat XX%. in with Europe another was and markets. Asia XX% Equipment XX% Pacific than in board, with and up growth X. growth and quarter up categories of restaurants more grew North China. some to very double-digit organic Slide delivered was America with all

Equipment with Food of margin progress delivered increase points XXX almost team The on basis QX operating of XX.X%, an year-over-year. margins, also excellent

obviously, So X% Food Equipment in to expect this XXXX. we and XX% strong grow segment, in to momentum

Instron, Test capital of Electronics & for Measurement and Measurement Electronics grew grew revenue was as with XX%. the XX% & excluding strong up evidenced with organic Test X%. continued of XX%, XX%. organic, MTS, growth demand grew by which equipment acquisition

approximately represent While XX% the the segment, our which of in grew combined annual semi-related of businesses, or million about XX% $XXX revenues quarter.

strong after of a very see are demand growth. We three beginning years to in slowdown

our of this to in projection semi-related So, growth organic X% slowing anticipated in embedded further XXXX markets. for X% segment is end

growth of in up Slide on consumables equipment XX%. Moving QX, with growth very strong delivered of X. to up XX%. XX% organic XX% with organic sales Industrial and Welding strong remained

which by slow was grew more oil and geographic continued to demand in strength America and organic On is grew X%. the consumer-oriented, gas down XX%, XX%, a On commercial and side, business, XX%. international the driven growth basis, North up

up was company. for a basis the margin and record the for segment new Operating XX.X%, to XXX points

side. X% anticipated to further Looking expect some in X% Welding on includes which to commercial the slowing grow forward, revenue XXXX, we

North industrial Fluids XX% up XX%. and blades. some delivered aftermarket XX% and America & business in X%. with grew wiper up strength international XX%, seasonal strength applications, the up grew Fluids organic with Polymers was with was growth XX% in Polymers automotive of continued

Looking forward, automotive of is Polymers in X% based more & business. slowing expect grow XXXX, on we aftermarket levels X% anticipated and Fluids consumer-oriented to further to current which the demand in

up Construction last X%, New demand XX% slowed X%. Overall Turning to was was rate X% tough X% to Australia in commercial due was residential X. XX% with to a up Slide Europe up and plus of organic was growth plus year. America and of down still construction X%. and Zealand an comparison down North

negative segment, slowing are Construction most As interest rate in and of X%. sensitive to X% we further growth minus rate you know, a XXXX our minus and is organic projecting

And Specialty geographic the year strong organic America businesses a organic grew in growth and had to X% North X% were X%. equipment up X%. chain up X%. finish on shortages was a of and supply basis, QX, growth international the Consumables with as grew eased

of levels to current components Looking forward, appliance in based anticipated slowing further negative is in the which business. revenue expect and XXXX, Specialty we demand on organic X% of X% plus

turn let's strong of a very X for recap a Slide So, to XXXX.

job As executing navigating costs, throughout the delivering for the and exceptional customers, world the of strategy. our input aggressively year, decisively while Recovery responding quickly our disruptions an did teams and our Win rising around rapidly supply to chain

XX initiatives, the basis for to despite in year, organic from pressures our by double-digit growth XX expanded result, full revenue our XX.X%. price/cost As segments. And businesses margin five of XX% part contribution and operating by thanks enterprise seven margin grew in base ITW points points significant to basis a with

EPS on of EPS in EPS ITW top of record GAAP a XX% for was with of XX% $X.XX growth growth XXXX.

translation XXXX a of marking on made Test integration $X.X and Simulation to organic grew Raised profitable apples-to-apples basis. the more solid $XXX very EPS divestiture core and share Returned shareholders the increases. than In growth X%, also progress repurchases million Excluding dividend invested we of year XX% to the our MTS negative currency businesses. highly acquisition gains and and consecutive to impact, in the productivity accelerate in form business. on XXth and in dividends billion high-quality in sustain our XXXX, an of

ITW's continuing delivered potential make to progress we the full our our enterprise execution while And to through long-term most strategy. importantly, meaningful these of path results on

and XXXX also see terms outlook uncertain. chain So, while easing for doubt we let's increasingly X our cost becoming And no inflation, picture moderating update that full is on there's move in some year the demand of input economic to an guidance. and supply positives Slide certainly

And we to approximately our end our XX% portfolio. pointed mix to at On call, bringing of today, the earnings the semiconductor-related of demand of we last markets total pockets would about business to slowing XX% portfolio. ITW's QX add

current but typically slowing take it cautious for construction, semiconductor. to top view, welding, made therefore year basing levels our sense rather this further to by approach not anticipating appliances it line aftermarket, on end we in our demand, adjusted In and to auto seasonality guidance more do, markets commercial just as of a related

positive by This to and on XXX initiatives expect growth a of more than from basis is X% we and cash Operating to XX% margin typical our to on invested a or enterprise XX.X%. income. and our known flow XXXX points capital approach. range improve should than price/cost plus, As After greater actions. tax X% points for cost rate is return organic basis impact XXX price to strong run margin lower approximately projection all conversion includes result, free XX.X% of implemented contribution expected to and net rate with based improve

tax in higher short-term rate expense as $X.XX to on divestitures. includes tax EPS also $X.XX, GAAP expect of excluding normal, debt range we XX% income XXXX, impacts our of the and the our $X.XX $X.XX from approximately to which expense $X.XX tax versus to revert our our For XXXX, XX% increased will of interest in

the we're second In split and half, terms cadence our XX%. typical first now for back of to of half XX% year, EPS

for Our framework. plans long-standing capital disciplined capital XXXX consistent allocation with allocation are our

Our growth organic sustain businesses. remains investments initiatives our profitable top highly support core to and priority internal our

second return model. is critical which line grows that a attractive over ITW's dividend The component in earnings time, shareholder remains an of priority with total

of acquisitions, can as finally, that methodology generate surplus billion shareholders' potential our XX/XX ITW's we have implication be of and high-quality selective XXXX. active from approximately growth program, enhance and to shares Third, our to potential such allocated improvement risk-adjusted in back our buy will And significant long-term MTS, and proprietary an the capital. own on acceptable margin expect repurchase $X.X share profitable returns front-to-back capital

mid- our segment. for single-digit in Measurement we're each expecting years. that organic to segments, which to two XXXX can our to in organic our organic some on growth Construction of the lower growth as And rate you is four mid high organic X%, Test growth due last growth at demand, Specialty resulting and enterprise solid semiconductor level by an solid top projections in to & of the overall is as Electronics, Slide well X% to -- which rates see in XX, of XX% last Turning seven and of offsetting slide, in growth

with very Overall, to we're strong whatever and to outperform as into momentum, economic positioned conditions XXXX. XXXX continue in we're heading through emerge we well move

it turn I'll Karen, that, with so, you. to back And

you, the for Thank open Michael. Cheryl, questions. please Okay. up lines

Jamie Credit [Operator question of Suisse. from is Instructions] Your first Cook

open. is line Your

you about nice Congrats more line in your talked starting talk you positive morning. a trends a or good quarter. Can you're a see in on semis you're rest give more Hi, guess, with just on first little are portfolio portfolio I the to last then color of know what of quarter? your semi? expectations, question, Can seeing where incremental. negative be your I my little weakness. you the XX% And XX% -- on versus

to in just it was the follow-up I quarter, positive. that question guess, then XX think my And I price/cost bps

driven a than that's are to price better price hold you. going expected. what your you I ability Thank think more And raw little then in assumptions on down? Was by or what that the XXXX?

a in is three those cycle was lot do to the really off order really are the coming in Jamie. we year So, see very with starting growth I we're in on semi intake strong color best, That that slowdown or high teens Okay. a okay? I'll And than the growth my a there, think the over better three QX. years. --

near-term into a before, XXXX. in slowdown. yet, slowing. the it like a Demand the think meaningful is slowing we now. is the our you is addition X% expect way more that continue that said, And it's do really we've So, to hasn't XX% in of portfolio XX%, incremental said to We is It's and showed but really semi quarter. this numbers up

Test a by Slide you one is Food important high it's at other we XX% lower year-over-year the point Measurement. to and and level. XX, of put look and can high just that mid- single-digit Equipment, And in on in perform continues course, full the to at to a if Specialty & really a that's down in then mid-single guidance And then Construction Welding, digit QX organic But And up to Polymers in Automotive keep projected little of year. the the segment, OEM, then flat. bit XX% about for our the balance, the portfolio, you little in to I'll Fluids bit see be growth & mind

X%. per we from I'll to sales X%, also actually QX, go our up say, just up we look if -- you typically, QX at day went

than that So, of seeing the some offsetting we're in XX% slowing more portfolio. the we're of

well really momentum, positioned going year. into next good So

the were -- encouraged. positive slightly an in the on really QX. price/cost on about talked think on this on expectation I price/cost We being and side, last call positive we of margins

to price was the both a This certainly for by better, third of driven think equation turn the I great see cost, it time was first I sides and but bit little that quarter said really the since positive XXXX.

encouraging So, quarters, heading XXXX. first time really into eight in so

the from Scott Davis next of Research. Melius line Your question of comes

Your line is open.

another Congrats morning. Hey, on 'XX. good strong year in

you. Thank

you. Thank

little a XX but you A positive that of real a neutral-ish kind top bigger in increases kind the nit, the X%, on number? more line anniversary the big you're bit X% you Welding Is growth maybe to forecast. versus had price to for of and any there in slightly now that? in price of Or

the talked separately volume in we think, laid price think out we've there's I price that. bigger XXXX. some certainly for and numbers reasons know, doubt the and about in Well, numbers. There's we both I And are no But that about as you out don't lapping break past. all volume the we've price for

a say number. I'll X% the just to X% risk-adjusted it's And organic,

rate, do you was thought you the higher cautious -- number. given reasonable take just a up environment. to about, run If pure at we approach more end everything probably a a it the given talked We

And as Yes. you totally guys outlook out makes materials reasonably material assumption is inflation guide? No, the in remains to in more versus assume Is think 'XX What inflation labor? a but of fair it that the assumptions fair kind about as labor your breaking sense. is when that general moderated? far inflation high, about it

Yes.

that's reasonable. think I

at nothing we're same our experiencing labor labor coming better others. a are a costs points We're bit but higher as really than price components elevated on costs, think they're say -- certainly fairly and cost XXX that margins I expanding I we that are little XXXX. the way, -- I still a in think so maybe by and or significant. inflation And But down basis in here and certainly coming are remaining significant -- then level. seeing materials in -- order, wouldn't typical,

answers hopefully, question. So that your

best Thank year. does. And of it luck Yes, you. this

Scott. Sure. Thank you,

next JPMorgan. line the Tami question of Your comes of Zakaria from

Your line open. is

results. great the on Congrats morning. Good

of ones. a So quick I couple have

how fairly the to the one should -- first think progression to XX.X% XX.X% going The is to consistent all in XX.X% about EBIT throughout Is be quarters? the year? your margin range we

I like to here. said, back of typical we're kind Tami, cadence So our

I the in is that fact the XX% also we our lowest think typically expecting and for remarkably our we're EPS full time, half, mid-single-digit somewhere of that We said of type is first you QX revenue, second growth. half, in go XX%. consistent. year; back -- Embedded been if in terms unlike quarter the really we've

but same remarkably out an still year, basis. maybe a a pretty of on QX bit start just basis the to years. company improvement you data -- margin little of And probably if run the XXX additional predictable around on give full lower, point, overall, year-over-year will the to somewhere Margins points XX% and it's that's the contribution a EPS become has over data

quarter And pretty think for a how estimate good the might first out. probably I play that's so

And just question get it. growth Got Thank organic is Any share I get a what and That's negative color. I'm and to ask hope trending number. right But fantastic trending now? you. can segments the I lucky going quarter-to-date? you

just we tracking Everything in everything and the from numbers really nothing we fine. saw what different and the looks talked is January about script So here.

we that would start thought the to off we're So we have.

awesome. you. Thank Okay,

Your Kaplowitz from Andy of next question of Citigroup. comes the line

Your line open. is

weakest the growth we in think Or your trend forecast highest margin when expectations has OEMs, most who a the lag will the think could across Michael, segment? price should 'XX? 'XX forecast that margin Auto see with everyone. for does flipped in margin that cost segments, about versus jump morning, in Good segment in nice we growth generally versus your you so the in

some here you think our Welding I done including segments, of at expect as such to pressures bottoms told has as improve as as XXXX. related think, one expect to Every Andy, up, know. they that higher-margin our price cost we volume -- all ITW as well I one us our in of just And every really planning is Automotive, year-over-year leverage. ones, which the segments primarily X margins dealing near-term of with well as

price/cost to ones a volume going But higher therefore, get Automotive, improvement have leverage I significant say the more operating margin. in it's in for the recover to take we've have a going bit the will about everybody segments just rates It better. growth Automotive time higher price. other obviously, the takes than probably the all little reasons and been some talked in to significantly are has But impact, on margin that recover would which longer in to more past.

current in think maybe will to the to margins two back view mid-XXs. our us is to I So take automotive three years it to get low

that's so would how I -- it. And maybe we characterize would

to Very to I then Michael. an ITW initiatives? spoiled of helpful, we can a the you that it here might think And longevity on little continues us last could give update enterprise begin get indefinitely.

a are segments your where strategy? enterprise you So strategy across initiatives of of your still 'XX? across thinking about Do runway segments? in long be the focus see will And how enterprise you

Well...

Yes, go ahead, you start.

Okay. think now. tenth Well, the I in year we're

I were in delivering think in, up back the by rolled XX/XX $X.X chance what projects we January these points, check here basis that all saw. sourcing. up had and and really go strategic encouraged into to from activities November we approaching when review and cost in out a it's XXX And savings, the combined if the you plans of from structural add and billion we

not been And I... and this a is I've years, been to saying for go forever, we've -- couple so I know of on that going saying

were We wrong.

back And in look, think, growth, happens ITW I'd million. margins X% model is model XX% long XX% which to But range. a organic operating $X incremental we've grew think wrong, you, if you term, given lot. the to was that plus TSR Then which income I ultimately, go I I

add and You buybacks that. on acquisitions top of

range. to the over to of on to attractive what it, to XX%, And you top deliver. XX% add X% range should X% an in expect X% grows XX% that you that's so X% to EPS us long dividend get X% you term, and

because, to been for But would say, to have wrong and as I give definite that's think about I probably a I've Scott on so Andy. me, enterprise you reminded I it, years. many how initiatives And think

for perspective is always just real the tool methodology room better. We would core I There get quite definition add one model opportunities as and the one our better. while. to of divisions I business that of and use it's XX there's think model identify prioritize in to of And see I don't to the operating our no our used business of is terms stopping get a that strengths perfection. that

Right.

mean, proprietary ITW think And years powerful from we business different this years than we model X been I said much today. applying we've as is ago, I more XX It's here it's this before. are sit ever it. ago.

better these at applying and people, to Our it more we've gotten much portfolio. a methodologies, we're all differentiated applying

And agree down I I don't so path, long as we think it Scott. with to time end I is continue any as that -- going it's soon. think

how set it probably up. we've that's So

color, Appreciate guys. all the

The of next Obin question of America. the Andrew comes from of line Bank

open. is line Your

[ph] on Abrams Andrew Obin. You have Sabrina for

approach? So XX of XXX on to expansion of XX XX a bps bps potential then, Should enterprise the I'm XXX price/cost there here? midpoint. margin guide, is includes is to just upside remainder of conservative Is think, in the XQ? bps had year-over-year you at guess, And initiatives. this bps of first I the trying the bps the benefit

initiatives, enterprise encouraging would into a here, leverage price/cost think points basis I if to of you as some Well, ended going year-over-year about expect is you just of to QX. contribution that progress we in is improvement just I'm elements use me basis. should margins certainly to on okay? round volume XXX. just positive let margins about of points We're year-over-year, make the some in to the somewhere at the sized operating Sabrina, be -- numbers margin good what which helpful, XXXX XXX go was XX%, going And XX give maybe XX the basis on at here So

into XXXX, better bit maybe -- rate that. going the think than a the run if I little that's

XXX basis points say what today. on price/cost Let's based know adds we approximately just

this we on this wages to bit, offset some our kind about typical And little the of then of talked a wages. is -- and inflation

new We hires support in growth are some organic efforts. to bringing our

are We growth, capacity. driving in including investing organic

And running That's to given that's system bit of less than that's typically the higher, inflation running so a probably that's points. XXX a XXX. XXX the at just little headwind underlying basis in

you And all get up, And points on of so that good add number, a plus you basis. basis think Sabrina. I year-over-year a that's pretty improvement XXX margin

it. Got That's helpful.

I And so in in Auto OEM strong XQ. was China, guess,

what's in Just your year? trying to think incorporated guide for China reopening next

kind China I of big most than digits think, that in higher China, look we make including bit is little Well, a kind gains. Automotive basis, of of as at a regions maybe China geographic our the A for And out, of mid-single year. are in is market you on a and in business, share progress penetration where continue terms as to driver, of really we lot that. pointed the

in China certainly our growth business of biggest also largest year. that's next the So driver and our

little higher company is a the so total is sit projections bit organic, to And that as X% in X% today. here we current than if China certainly our

So...

Great. on. pass Thank so it much. you I’ll

comes Sprague line Please line the is Jeff Vertical of Your ahead, next open. go question Research. your from of

everyone. Thank you. Good morning,

Solid results.

it was could thought enterprise, little originally, to often as maybe and kind maybe couple you but recently last on oriented, cyclical enjoyed the growth. of a you're bit And organic of a the back it years. has wonder of incorrectly margin. I've suggest that. between trade-off would I just reflecting here more cost the of margin Just of growth a lift comment not kind growth growth trading Obviously, if for And

that, overstate be interesting. historically? thrown would just had any growth the organic it it I seem point, but want So up that at don't system And to has think, on than context does I the

Yes.

much delivering of about say from work all, more this clearly, Jeff, last their first ourselves is that what the a standpoint, we thank what decade, position operational you do of businesses And is XX% now XX% noticing. five a of seven to to I to lot would businesses arc we're on years, we've for more of inside had lot are in The just been or -- the First the that to closer for grow. get terms potential. an in the to

a and what reallocated so to of attention effort -- And up be to And to commercial lot is allows now. opportunities just showing lot of and grow. that's a our which ultimately

of of in because gotten the We position energy have sort these a growth we've lot in collectively the a internal businesses of operational position. firing strong devoted to really being -- sort more opportunities

do and XX deliver we've much now at we've And so secrets opportunities to delivered not it's -- of everything that's have on real we've part got what is to we're stage. one the It's great we're the think, decade do and time the stage throwing of you forward. at I outcomes reflect can't in reflected that currently I to got the But the to once. right my last of, would at too any been tried is And clearly on at think the a we things focused all where over going what that and be we've what in off. growth the view numbers right at organic that

that moving gave other that other you're be and Michael wage the margin -- that you piece within attempted growth investment. levers normal Is kind and than funded for? sort the would higher? the that Is of number mentioned? pressures construct bridge, that incremental inflationary And Or of that of can structurally

That's exactly the way we do it.

our our margin self-funding incremental growth through are contribution. investments We

growth. investing those innovation. and targeted improvement bps after -- in a significant next capacity incremental deliver includes us So in at supporting help really historical the XX headcount XXX And investments that We're of that's is we're in in way that grow that still in now rate, run to -- and going areas year. margin of the

illustrates support that line. flow of generate cash of of we're to chunk these incremental drives of just that a invest our point we're incremental going bottom that dollar and every so of in but revenue to we the that the some are that profitable certainly businesses impair to lot a organically So it good doesn't belief that, it

Thanks Great. for that context.

of Volkmann Stephen Jefferies. question is next from Your

Your open. is line

of you portfolio and material Good of questions kind been morning, give your a would raw transportation portion once follow-ups. Is back energy answered. couple guys. Most and have lower of there A expect the costs sort their my to through? work way where of quick price of

is a portfolio to our materials. where of the portion have very pricing raw We small indexed overall

If it's an so giveback an somewhere it around number, price. really our all X% revenue, up, immaterial total on it's add of where you automatic

quality I to and command products a nature everything -- historically services as on and our differentiated given we think that share. we the on expect of the our maintain premium premium and focus of we market and compete our else, gaining delivery,

that's Steve. how answer your I'd question, So

then Great. And Pretty thinking capital it. out maybe sort or M&A relative the further any anything of I question on to kind deployment your of there? minimal pipeline, just divestiture obligatory to sort of call appreciate opportunities then. on

Yes.

the quarter. called I think we of I you a So saw ago. two a about year the in divestitures -- out handful business think part here units fourth That's of

is right the what two would time a capital to think and kind ago. it's are in I really a And that smaller now. first one then of at got the more So a meaningful And done. high performing got works. we're we've going level to that's We've X right year talked markets of conditions summer out launch we kind the about sometime this of round a and assess that and the whether kind

at. So that's we're of where kind

And Great. M&A sorry. pipeline,

for same Scott priority mean, growth organic this all way. Well, yes, get reasons one think answer question every number we I the I it about. just I we time, mean, talked is the that

capital. model company, we'd acquisitions earn accelerate be in our on of of potential can a growth where and rate through implementation interested the high-quality shareholders' return long-term that we the certainly -- margins think the can improve of reasonable the we business I

a example good did opportunities a all And we're that that lean extent the definitely big of a that one check year checks that And boxes. big an other we pretty present to That that so was in, is themselves boxes, ago. way. the going a in the to MTS acquisition like

-- that's So but...

looking near of sort the on that's generally term. And really them help of sort Yes, acquire sell. that just the are more not economic a we're a What businesses. I businesses, not -- to that, in be to is maybe color topical looking where uncertain, little acquire great top good macro good we and is say to time businesses, it's environments broken good would those businesses of

environment that a opportunities So expect less half, I the trajectory if but this might least at through bit than the clear, macro a I'd normal the be gets say anything, year, would more the until little little see. we'll first

Appreciate the color. Thank you.

next question BMO of Donner Dan Capital the from of line Your Markets. comes

Excellent. you. Thank

the business highlighted, after for to So you. presenting more Equipment there's standout cohesively the business, the a itself be definitely difference NAFEM yesterday, as in And than before. have Show seems been Equipment noticeable a you how attending has Food

more this and aspect consolidating allocating like toward on will and that and also products doing ovens combi So the maybe have certainly on competitors? are you with priors, reps that sales there investments regard which to cooking comment some well-known specifically of things you're side, areas the large

Well, I'll stab. a take

differentiated really to a you products, continued Food putting different result over been think really we as five invest great in we've -- on the numbers their of putting has mentioned. the strategy. doing including some been the in the We've that than not Equipment we're business. up have up team And I anything categories last executing years

And really innovating categories. all out growing of the over so of if coming double year, us and up a year, the XX% single product organic this rate here, high digit, digit, and pandemic growth as you last XX% add result that's

term, I our that capabilities winning And to these businesses. add near supply

decision in a to kind big of this to the in carry the chain Yes, way. think supply service definitely, the I on paid has been conditions and enough an our Recovery same the chain customers of has difficult to different back inventory win excellence off supply with level where area our positioning

get think the you is And team that sense Equipment I Food in mood. good a the if so

they're because really look on share of that's think some almost XXX including you if I at year-over-year gaining and the -- margin improvement on side, basis basis. almost a points up putting XXX that numbers, strong

on we momentum the like and very bullish here. has going got business, into that So ton said, future a we're of XXXX,

you. were Yes, they definitely Thank mood. a Okay. good in

Your Fargo. next the from Wells line question O'Dea of comes of Joe

open. Your line is

different over taking for attribution that? you to wanted couple across of the my proxy of question. gains start of outpacing. it's group to Can different maybe stickiness sure outgrowth bps trends confidence And Slide pricing the where talk But you volume I Thanks morning. I'm degree the environment to degree pricing share in is seen obviously, of I just years. the XXX your Good where versus last those think, which share the companies, corrects? show the you've is not to the gain primarily which and chain a supply X, as

victory way to we've that consistently outperform. it's the say would I go guess growth across company and performance of the this can -- that various not not to consistently can is of I'll our break claiming We're to into pudding. we kind that the pieces. ability we're that the response got no proof in be room the my apart Ultimately, deliver of. What organic ability there's our of We're here. a lot terms in Yes. capable -- is in I

on couple are board, what is the the of aggregate. we our saying we peers are But growing a that years we put in where

markets is versus or our outgrow the above. pricing our end, what our say it to able the and I'd matter goal. that and outgrow approaches of or that's market Now to percent we're capability? as long peers In supply exposures theirs as really the of all consistently doesn't different

ago? that you're a And maybe didn't But seeing I I and more challenges way. or supply any bit know don't chain in little in now XX X related you as competitors guess to are maybe months ease, if see the market that, competitive

were customers. Win Recovery not orders. Yes, strategic I was all positioning onetime share focused the beginning, primarily And our we the on from interested in opportunistic think, Joe, gains existing the about

confident are we're with direction. share to so pretty that stick. gains going These And

chain the for kind for to a I are differentiated chain think the supply how of great capabilities supply disruptions that demonstrate were our opportunity know. and ITW pandemic those didn't customers

think the you what's that's contributing the to outgrowth about Scott. And element I I with to mean more so relative that's also really as equation talked that's of peers. been one --

accelerating the which clarify wanted to X% maybe X% demand degree daily burn. plus versus just to average that's I on sales then plus And underlying versus backlog plus X, seasonal versus the seasonal or --

demand parse any trends seeing underlying But underlying of versus inflated hard sort decel? on look think backlogs I accelerate comments what like. it's to there you're out broadly what given

backlog-driven Well, I think we're company. a not

And know, parse as you don't out also backlog As we you hard new a of say, what it's orders. to carry versus was backlog. lot

you not can I'm typically, I So sure What can go by give sales tell you answer. great is day our per that, X%. up I a

If time, up look went they X%. back and in by go and you

momentum slowing. are and going QX some not got definitely we've into And And things XXXX. great so

appreciate color. I Great. the

Your question of the comes from Julian next line Mitchell of Barclays.

line Your open. is

Good a approach. and you for growth whole I that, sensible and organic midpoint. guide an totally take thanks wanted morning and as back Maybe circle understand you've X% year squeezing within to that's growth macro a got the gyration elaborate guide the very in. sales just me at to But organically the for don't the

double low did just quarter. recent You the most digit

Any four that mind So plus XXXX? one and that how we it particular the just sort or Is down. you through color all Anything the two-year year? understand bear steady about step to stacks? we in give think think moving want deceleration on in we go we how on about of through a as should could really at

comparisons the It's Julian. all in year-over-year,

in year typical said, with like a line to standpoint, expect we So I play our revenue from out the cadence.

of And we from or risk half. in demand model QX we the up then the best terms demand acceleration half to But our and in and areas bit nothing of out adjusted baked with to levels a lower kind big deceleration of X% a here little so slowing where seeing improve the there. in kind in some come current there's we're X%. back starts for We've of done in, back

growth the the basis. the of maybe rates end, math, by X% if end of all to driven towards first see comps the lower towards kind that and that's you year-over-year is I a higher second think on run half are X% you'll the the half is and the

that? price That's within those then But is there, us how down don't resi I one with digit simplistically, of help you guide or embedded that's is are you single the resi Construction within understand yet. products, for There's if repeat to very you this are pieces, down about big three volumes Apologies Those what's high But think replacement, sort clear. some X/X Thank thinking year. is you. for maybe that I of of think a something. in commercial. year? build, And have sort bit built new X/X have just anything. maybe X/X we

housing market, I mean housing. the big new the driver, Julian, is

the about and residential America, in some our side XX% the where we've that's summer, North talked slowing, since I so And think. we're about which here seeing of is business

big new nothing driver the here. that's there's So And here.

The hanging there. commercial in side is

As in the said, summer business strongest I after our it was the also pandemic.

Right. I mean...

have the of the the advantage in can mode mix pretty the in we it positive. end tailwind going exposures but the is -- that all market of have. we're Part And different headwind net we and mode, to always some some of

So...

been challenged. it's little well been macro a us the of for be have that's parts year, business other down Yes. this really to It's also a when performed but going

So...

sense. makes That you. Thank

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