3M (MMM) 22 Oct 242024 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the 3M Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded Tuesday, October 22, 2024. I would now like to turn the call over to Bruce Jermeland, Senior Vice President of Investor Relations at 3M.

Thank you, and good morning, everyone, and welcome to our third quarter earnings conference call. With me today are Bill Brown, 3M's Chief Executive Officer; and Anurag Maheshwari, our Chief Financial Officer. on make that comments, slide Xm.com. today's this are will your we'll presentation Anrak our call note of questions. Please earnings posted and some website then formal take accompanying Investor Bill Relations homepage at the release and turn X. Slide to Please a read take statement. the Please forward-looking moment to

making assumptions of we future the be statements certain attachments differ about can and some that the results. that our please call These presentation, off predictive note risk in predictions. future today's references cause the important be to Bill. uncertainties. Item XM's Slide non-GAAP found press that Please hand reflect today's be turn During risks performance of today's will the of and most to XA conference measures. financial statements based non-GAAP and to on results are factors subject of X, certain are Bill? certain most could measures call, Reconciliations lists to events recent that, views making expectations release. With from our current throughout and to XX-Q Form will financial actual our to we I'll

Thank good and morning, everyone. you, Bruce,

growth. partnership leadership of quarter revenue over XM's and to results first after recently take on Anurag his share nand and First, I'd pleasure working on earnings forward of today, and the non-GAAP per call. of as to joined his XX% with $X.XX, X% as Otis. years we the off past strong moment with like CFO Anurag XM XM welcome serving XX CFO. Earlier in a September Anurag to earnings up early reported organic third look I've had

X shareholders our share cash $X.X with the extend basis non-GAAP per quarter company dividends to over and XX%, earnings X% share first with of we and up strong via billion returned organic flow XX% revenue margins performance quarters, on XXXX increased conversion points results to Our the and growth. XXX%, repurchases. These overall during was $X.X billion, XXX free operating

performance and a by a our raised of As full share. to bottom the $X.XX result end per guidance earnings of we $X.XX $X.XX of to deployment, capital [indiscernible] team's $X.XX, range disciplined operational $X strong of to the year

During call, priorities: X across and performance organic top number our through our driving operational enterprise; innovation commercial capital. I improving described both QX effectively earnings top excellence; three, line X, reinvigorating deploying and improving growth two, the sustained

As efficiency. both I efforts R&D beginning time, our mentioned take improving blocking of A July, is tackling and on and some R&D commercialization and we're in going the the R&D fundamentals of of but effectiveness lot our out and on our basic progress make more to getting focused recent productivity investments processes. to have

through shifting more XXX low-risk reducing product our as products organic low shifting taken it theme more comes rigorous and and curve. and redesign off days running details the turn interface. to in has tools. drive rapidly opportunities, staff, to in forecasting specialty slide we've of those nonvalue-added or films product execute And in of we XXXX. We early QX such X for I'm test fourth the off performance, to to low the out And range how year. And in our expectation ending activity demand manufacturing. And we're beginning we within process, changeovers by manufacturers, electronics new through where and sprint expectations XX%, this for adding optimizing existing to improve range. sales chain and and incentivize who about the points details productivity R&D an is semiconductor largest common actions past engineers a visibility And our and the metric growth our automotive, launch to SKU across R&D and fast-tracking to points is using on people reduce to year logistics to XXs. A capital bottlenecks need upgrades process, now X and and to been to on-time starting new mid-XX% and through the delivery by next have our only distribution implementing significantly aerospace, to providers. in our surge. and finally, our the new to to to XX of and introductions, practices. When facilities those discussions long X lab our full the we're of to operating the XXX simple sales they which XX specific OEE, as the our into analytical measure driving a with forecast OTIF, I value launches fund to last projects focus average beginning in XX% our to the leverage XX points paid from improving journey companies, harder address development, velocity development better the recognize the of or Initial making, we quick pilot projects accuracy, materials push factories, the performance. We're scale on-time a suppliers our kicked to and accuracy, to initial equipment to the links below bottomed performance on these of the cross-sell years, at for our our above the product steps we're we've and up for and In the we're our for maintenance days decade-long major budget best-in-class the meantime, product demand in year. I toward large tasks product companies. We about and focus year to the from allow turn new and and to area PFAS-related the recently of inventory areas new or improve lot model visibility up are than calendars we'll on standards running customers. in with in looking XX on XX below improvement different including increasing promise further product short are share we're us have quarter spending divisions of machines free year time improving of and factories, set are chain due suppliers reliability priority the new XX% offloading enterprise-wide within forecast opportunities fines and us around the business factories, in investments poor going rolling to implemented to about best-in-class which to discipline in at all to from importing expected a price our back improve as efforts continued pipeline know by administrative our train the will development from corner encouraged our and we're assets now value averages QX throughout how plan customer we've to results example, the has efficiency, in stages we're in lost well visibility a on-time which For show we've XX-week in on level outsourcing engineers the orders pipeline. workload line accountability acceleration product working a force, on at of XX% as raising facilities. Utilization markets. After more capacity rigor in and OTIF, is contract we post-launch high load delivering the network up be this few we're a these eliminating extensions up these for and evolve. But assets to weak well project higher allow common customers. on seen been OTIF capture harder for getting to and our year since We're delivery progress XX capacity performance, steady respond tune bending

approach network holistic I July, is in to on for a As lays a mentioned at fundamental that focus basics groundwork more look complexity. this back the

particularly and While over in more quality, level and in the few critical consolidation to improvement. gaining opportunities both at will time. A the OpEx talent, of site past, allow and our is work to leadership facilities operations look the depth have cell we've maturity enabler agenda OE our areas us of and in a the capacity new onboard we flight the today, continuous metric in and planning take at closed a materials continue fresh our team, of

XM, of These a efforts broad a is foundation the which part at safety-first of culture. are transformation all operational

a month, employee our Zero last versus not be. improved want Journey company-wide campaign has While to called we in this towards our injury workplace. launched to every Earlier engages rate it's where injury-free year, an it we drive that

to X we've $X.X with We've CapEx. repurchases conversion adjusted $X.X deployment. of to of billion. free Turning cash shareholders billion including investing capital R&D flow generated and Through billion XXX%, share $X.X returned $X.X in after months, billion of

of balance now few early Our small strong, the process. a stages in sheet remains businesses our a reviewing and actively portfolio we're sale with

our priorities our it of our encouraged So that, I'm overall, customers to quarter guidance. and for to over win Anurag laid our the on me desire shareholders. With on we're turn value that creating making more team energy X provide I've the for and updated delivering the progress Anurag? and details let by out, and to by

billion, Bill. up product with X. or Total $X.X were quarter up initiatives. Starting with Thank excluding adjusted geographic Slide on sales organic growth prioritization third you, and X% performance portfolio X% overall company

mixed build trends retail reflect in with results and continued a spending. line markets, in including discretionary in largely strong decline were automotive electronics, market consumer growth industrial softness OEM These in that end rates expectations,

builds. due growth, $X.XX. from was improved was tough and with items and benefits global business. digits, improvement last basis along in operating geographically, low as This Electronics light our home the organic to expanded EMEA to EPS Looking year. And points or and branding The with in breathing Pacific, commercial and growth truck recovery up driven adjusted below-the-line offset benefits strong apparatus single margins from performance, $X.XX, Asia resulted digits supply comp U.S. organic a in XX%, from driven restructuring. in by operating XXX of significant decline productivity up self-contained Adjusted XX% by was strength led transportation, by adjusted by safety mid-single benefited car personal down flat continued

$X.X revenue Industrial Safety were and of are Turning Slide was growth devices. group the primarily in strength growth or X. Industrial business and which by adhesives by to tapes division, sales solutions electronic billion, with particular driven organic bonding on The X.X%.

comps. while granules ongoing markets, year In market was balance we of due and slightly and addition, the to the saw in divisions electrical unfavorable softness growth roofing down prior

$X.X were sales adjusted billion, up Electronics and X% Transportation organically.

delivered Our high consumer of growth business electronics ramp season. upcoming OEM as production volumes ahead customers the electronics single-digit organic holiday

quarter. car Automotive growth in growth the declined business division OEM and with driven and light delivered truck was organic mid-single solutions. builds, and down in while strong bonding acoustic The Aerospace auto Aerospace by line third global digits

our a versus in truck auto business X% build X% and total car up light was decline rates. Year-to-date, OEM global

penetration new continue materials adhesives, slims multiple tapes, electronic platforms. gain auto We to with on OEM display and

Materials and and was Looking for Commercial demand high and pavement transportation driven Advanced graphics and digits at electronics, single up oil demand in glass by gas the and bubble strong digits lightweighting Transportation rest single for markings. with of low the applications transportation markets. Branding grew

portfolio X.X percentage our billion. introduced back-to-school and a business sales growth which command Home point the were Improvement new portfolio, prioritization. consumer Organic delivered products by $X.X sales in the declined Finally, from mid-single-digit for seasons. included headwind driven holiday X.X%,

fourth to focused. actions value price-sensitive well declined prioritization within portfolio divisions the be improved, to retail the year, consumer Through consumer remaining expect continuing as customers the in business to as the continue the has and of we course and trend The business due the quarter.

Slide Turning X. to

adjusted an we an of basis share basis, margins increase of on per QX earnings $X.XX delivered XX%, points operating of up mentioned, As or XXX and $X.XX.

points. These and points from while count. a impacts divestiture Operational to EPS headwind remaining currency share performance, year's XX of basis along productivity $X.XX and growth ongoing benefits items, contributed driven comp, margins, combined tax was with foreign XXX earnings. with restructuring with benefits growth, last basis acquisition of from lower high interest organic including $X.XX along net contributed and to The was by a

capital free strong of continuing and We to by driven generated flows solid $X.X invest in cash sustainability. Turning adjusted the positive billion growth flow capital and quarter, income working while generation to support to cash.

free growth XXX%. quarter cash billion have flow Overall, Conversion and for XX% very XXX the we points, $X.X of generated strong performance, X% of grew have organic year-to-date expanded XXX%. had was on we EPS with margin by basis operating conversion

are X. year Based guidance we on Slide full on this performance, updating our XXXX

safety growth estimates to adjusted flat our unchanged, full group low X%, to with single business industrial year expect up with be approximately digits. We organic and

digits productivity. single XXX and up range points to down XXX of to by and guidance adjusted Transportation range expected low prior Electronics, driven from The are with count raise our year the of to benefit, low consumer by margins single up expense to $X.XX of $X.XX and end basis digits. us confidence XXX operating to gives versus net momentum continued EPS interest be combined Full a to lower operational the XXX, share $X.XX. lower

will year. XXX% Finally, full in expect continue capital the year-to-date XXX%, be the quarter. cash free fourth flow will for performance to with we that is we working flow performance our that the at robust plus expectation adjusted deliver conversion With cash conversion strong

to a forward welcome. working for with priorities the as out. With the of us the excited call the let's open ahead to I we opportunity to take moment team XM look the we and Before for I'm Bill the that, for thank questions. execute Q&A, turn laid want has warm team to

Instructions] Melius of Research. Davis [Operator comes from Scott question first Our

little everybody. spent an down start obviously, It quarter. progress. But in good Bill Bruce, making more bit some road X a like and of you supply of chain, lift, that that you've Yes, in here. think I to and big opportunity? but chain bit pretty you're and seat? reoriented? of time How congrats as the morning, kind step kind X not little a to last Good Bill, remarks, much transformation. an a on time step the heavy supply of or how And you is, operational the want quarter, all seems about on getting opportunity Anurag this big do Is had now some not a prepared this and talk that

continue for in our elements Look, thanks question. operations. good across progress the Scott, So make we the of to all

sold of is Our it cost big goods a a of piece of it, chain. piece $XX is supply billion,

looking net supply a that of to We're drive productivity, is obviously, all So high including elements, across those focus. inflation in net chain. of degree so X% X%

direct including X,XXX manufacturers. We have about XX,XXX contract suppliers,

a drive hard teams that, do on we working Our performance, consolidate are to and continue job good this. to

think I the say front I to we're of be end journey. would what at a long

of lot out of we think I value basic a get negotiations.

relatively in of about opportunity we component savings. product, more our our think overall lot a have we think I as supply more value engineering a that's small

-- on performance, X% performing very are teams of hard think, the very supplier opportunities good can pointing Again, it's but And it's that $XXX improvements little million million think step in and very working, billion, talking more team factories. The some on base. with time doing the is and we're $XXX back $XXX because So remarks our $XX talking lot level, delivering this. well, full. a think year-over-year. I that. on well some really, of if productivity. out really I We've key a driving an levers There's net I year. terms but I you I there over time growth better job very, you're or getting we're to as to prepared the get operations of drive full we X chain million, more across and all spent the net, of in and drive that's about -- a focused supply the value my in lot capture both worth performance do improvement, our including seen last a value of less in

that plan incentive the structure you really That's the you have comp Does little you for and mean? what bit. do quickly? -- needing helpful. little increasing think that bit new of incentive want does Bill, you'll where a in talked mean in to a a structure change really Will variable component? about And you kind Can XXXX? And of you place dialed this kind it to

So Scott. good question,

more what's management before clear we I objectives going across think team, have these to important think is be plan, us I we to very for make in deep to comp the organizations. sure the get

into So what achieve another. to we're all shareholders understand to X accountable we

step end we is objective 'XX an of of some our I plans, comp will do crisp that's I course, get process. setting But our adjustments more see comp you that think think X. And opportunity on back a little to think I have in plan. the

X,XXX that speaking on at flows out as But it this not executives, about the between at salespeople are people continue company. AGM. with earlier structure the comp our to our to with XX,XXX-plus across the behaviors in shareowners importantly, plans, organization. And based We continue we results have just had drive year but look yes, in we X,XXX we'll out look our the incentive full to do the there, at, and right into the right we'll

So that made. in come about will changes Scott, they We'll there's the going talk to fruition as be that to months. coming be more

to We'll of go Bank Obin next with Andrew now America.

questions, I guess I'll X follow-up question. ask on Scott's

views are what the his a Sulin was decentralized lot ran Inge departure pushed Mike of has XM? what which your company for a done, predecessor very I Bill, from centralization Just, know centralization, very, on inside way. in which

excess PFAS could just indicated they of recovery could your costs. to operating of getting one. Part lot that of carrier they particularly are new I X, on their and hear evolved where indicate, the love That's arms, These perhaps, questions recover a part to has public related given side how the since philosophy you we're they insurance would company. combat in statements. So insurance joined just

of on the would quarter. publicly are process on on good Congratulations available be sort in insurance updates any recovery a you So where helpful?

leader, XXX XX a supply centers and and I to an together. for right first all, X.X all I or Mike Great, ago. at common to plus about think they of across do. It XXX Thanks one years they was Peter Givens, performance the questions. think flow consolidate chains the thing it with allows under of performance, factories I to us look under Andrew. and mean, a look our close how to It's -- compare and really factories minus XXX network, another. distribution did metrics,

make lot separating or that a of artificially geography not business a by them did group So by sense.

So the the at of the you'll all get of power by together. operations looking whole

So we'll of the that, going do call was benefits the because smart global right change. centralization, do able of think operational is and was it that out to that to call step you value operations coordination. I think that it I of organizational reaping and And we're be if that. the I forward, get

it think right I step. So the was

I business some was think upon within certain we the we run move structure but we on are want we're think those run generally, time, to globally heavily the business that But regionally, depending within also the coordinating stand good. There'll perhaps and we Michael the really a in focusing how on. adjustments that to broad chain BGs area. think supply groups. out right I was groups. There put that units, more the business globally, the business all taking X I and particularly in some X attention steps little that geographies over

intend on about about. We're point it's I $XX $XXX we is bit in in And multiple of -- combat insurers. between it's Recovery coming recovery settled active water million. centralization. On folks total others quickly, you'll The expect We with insurance in our given arms million suppliers, obligations efforts quite your continue. efforts see and for know insurance that public insurance do their our the recoveries, talking litigation and higher mind just QX, So top we that Q. weeks. In insurers policy that's up to covered are other on to sort liability a piece us difference in our year-to-date, honor to of is what we've this recoveries over value. days insurance than our and with full. arbitration ramp in the

more our our recover little on and update up it's We'll Q others, bit a different we but recover So quarter we're investors more efforts to through than as and starting we're each and time. ramping we'll insurance. recover, over

We'll go Wolfe Research. Nigel Coe next now with to

the for thanks update. are Bill, And These helpful. morning. really Good

you're would recoveries coverage insurance working what perspective. wondered points I just from there. But question the ramping my the productivity. total around maybe the X is the first you a clarify be up On point point, of on really Understand could net that

here. lot a initiatives in play got You've of

nationalization, OEE the next What on achieve those in You've a is heavy improvements, mean got other that improvements structuring of X I target bulk there? targets? of supply any we to the some chain what's as the lot the years? sense sense here? And points things more do driving OTIF or lift X well. Any supply important and X need chain

So thanks much more we're Nigel. don't other or getting, think question, how much recoveries say I the insurance to for what can I on than mean, I captured date. we've the

update we think So we'll go. you as on that I

of of expect be back, when We bit to ramp cost supply to look, better. But is is of going half at I a roughly billion that look I that chain. goods, step mean $XX worth

come supply parts you'd chain. of So our is out productivity bigger expect to the of going

seen have We in restructuring our factories. That benefits flow factor. a also is through

spoke be. factories factory to to lean through lean the company. running you in centers. Last our time, bit cost amount of expense of however X% It's on our distribution logistics waste and as our our across our you're quite it, operations activities drive yield continue generate characterize cost transportation to a seeing we loss, in benefits or lean We want the We're benefits of and about -- our I network. seeing production,

So it's substantial. quite

that going to at getting are year. every get not big big, We dollars you're

to tens going over It. year. get We're You and next we continue continuously that and over go into it Kaizen than last, more millions at this of get doubled to running chunks events of the it. Kaizen events year we're in we've number expect time. But

back, biggest biggest supply is is the stepping to chain. the pushing all base, I of of going come would net the put out part of drive pieces is So these cost will that productivity hard team say which

maybe then role. congratulations new Anurag, on And helpful. that's the Bill, Okay.

the to come below-line sure down but And looks the bit Just to Q. in like wanted would a on high end, just at step trend, especially on more much math. XQ, a that's XX.X% be make want looks maybe it it any I color the get right Q X% margins organic big XQ color quite about very to like growth helpful.

Great. Nigel. Thanks a lot,

margins covered into much XXX million, about lower are about think XXX sequential to in points of Sequentially, to seasonality, to lower $XXX investments. cost than under has management factories QX QX pretty been The shutdowns, by expected. absorption QX I what due with basis revenue line translates lighter inventory and timing you margins we the due in which of and it.

higher expected. line So overall, much at largely pretty the and it's with bottom kind of lower the flow But or share if $X.XX midpoint of that. focus good, net interest which good on the higher you raised on take productivity. -- because that the of repo the seen what $X.XX income a really in is end to leading we guide benefits a step by we generation, back, interest expense. the is We've share and progress Plus by of cash

in areas So pretty QX much progress line. across of these putting together, that all all and making

Vertical now We'll Partners. with Jeff to Sprague go next Research

a Welcome little I we're in to neighborhood end aboard, of I Predominantly, of of the prior want Anurag. at a the earlier the back restructuring. get of just the to questions. bit these of fact just kind wanted sense tail come some

of second I $XXX million did had and the half. like half in in go you spending the million think something $XXX first to

the Are seeing of we lot that that Bill, XXXX? if sort benefit in numerous is granular from get much is the to out trying sense here. XXXX laying this really things expansion a groundwork of for very the and on track. And is these Or really restructuring plan. then, you're underlying of margin prior that I'm still a and XXXX, in laying So

restructuring, mean, on are track. the questions. good it's Jeff, I on first, we

it's a next $XXX the the year lot a back bit from net margin from and we're the these half little effort million more million program. And programs productivity a into been of ground coming be restructuring, of some up of so this is the months. flight, lot focus improvements the X to that to operational more in have have some lot football time. This in over about get in are last year game coming metaphor, the to of going that $XXX about and yes, pilot are front gross in and on numbers ways margin will and multiyear X a tail Your That's ramping are a right, going or $XXX journey. or realized they're half a a there's multi-quarter, of complete at. for excellence. the And so But in of guidance, couple dust million year. and where yards things It's

of opportunities ahead big So hitters still, to innings big X, go opportunity I that you of coming see the way on of start factory to the waste bulk and a we the no then, the I excellent. And function, a philosophy legal look company. winners, got look you run how pull continue really operationally it's then out think across here big out at sort lot lot a as finance. excellence across of should reason rest of what's and that growth margin early drive in after a R&D, no operational things quarter, quarter every quarter, throughput why enterprise. There's we the good extending improving when a and think reducing doesn't of room we've function, these and much run extend being getting better quarter, I a becoming us, of enterprise, of the of think think now at years, we're to us. a no of of to and I levers particular think the I to ahead X, happening And HR between is become Jeff, lot whole I I onetimer you this, the And are X across but our of better do network. There's which in how there's why lot all a next

kind stepped then sizable the on on you it's thinking about operating liability of Great. the the quarter of just repo outflow like writing what's forward? up buyback schedule And the kind the of in sort in just question, level of maybe comfort should against on kind capital and/or as something spite a of of deployment think mean dividend cash of a or a bit Understood. going cash managing payments? that question you're minimum about backdrop about check. How the liability of we I

the I'll So CFO as start, putting he's of lot we up that here a sheet. because year to million. $XXX But liability time horizon on this. big the know step to about been Jeff, We we're balance over already don't on Anurag, repurchases. his I'll on on out and this next turn aren't I mean, our good and did payments billion yes, QX is year-to-date. Look, at It's generating it thoughts see offer flow. cash I in It's $X.X going new through

we've So opportunity to deploy an got capital.

we were that pretty the smart attractive. ratios balance, leverage remain with in here ended QX think got a capacity. We've Board. hefty from in got pretty our authorization cash open an We've I doing We QX.

So quarter. third look, the more capacity in we We've took advantage of to that got do here more.

where strength sheet. so stand I on today. of the But pretty And balance about thoughts as on good the we Anurag, his new feel can maybe CFO, comment the just

capital generation from perspective, that capital leverage, allows Sure. Jeff, balance, cash deployment a which is solid and believe the optionality I structure allocation. optimal really our and actually cash flow

leverage grade investment year, the A quarter importantly, X.Xx Xx -- a as the of have and a it of than we at the and mentioned, leverage, the a third a And has through the working billion, which On robust. quarter net rating strong is maintaining been we've Bill We seen ended course the balance. hefty more the of was with requirements of at ratings or the AX third good minus. quarter As very business. $X.X cash the of generation cash flow capital of end more

we $X.X XXX%. the capital, generated terms other any inventory, flow that's expect do higher stake and after this portfolio as earnings to first especially of and billion in reshaping and XX.X% make CapEx. the optionality cap than in we our -- solvent and investing progress of the of will in we we cash area we R&D X the Also, increase do. $X.X in future conversion have in the And flow come billion months, working years cash grow, in For keep

strong structure. a capital it's So putting all of that together,

the also return shareholders. have capital to invest optionality, to drive to flexibility We business to growth. in and

it, we'll So the active next having months. discussion more over and talk that's more an probably about come it we're few about

Julian Barclays. Mitchell to now with Next

Bill, tools But for about or XXs. so, driving a of a trying at specific morning Good it margins or conference operational think I charges. including you the X to some welcome, some so the about Anurag. weeks high color of tie very you're XM excellence. good Maybe, for Right of XX-ish lot together, sort -- ago into around sort and maybe now, getting talked rate, gross on

of to medium maybe the uplift the way or margin XXX And inclusive you the sales XXs points out right about squeeze operating a enterprise stable XXX staying and think and is of the in sort then of on term, of of relatively expense sort So as sort the that's level? of more efficiency low R&D, SG&A gross from R&D? of share as total sort returns

Yes.

Julien, it's question. So a good

in in the margin minus. the high right mid-XXs points health of we care. or are low and range, in gross in excluding now That's plus XXs. running past XX%, were where XX% We time There are the kind to

have our in business we achievable. -- it's way the our structure So today, certainly

cost goods. of out point As billion worth in $XX If I year or we a math and conversation, this of did gross it's a of year. $XXX the of sort every X% do net It's margin. earlier more less it productivity, laid If of million. we sort there

here. course, dynamics lots Of there's of

You've got mix happening the in business.

as products exit got we year coming in. kind manufacturing. of, next middle next You have new PFAS year, as We've of

under-absorbed to some take in away going of. the to have their costs that. within of You solvent production got absorb wind care got move will TSAs factories or down. is We've to we've Eventually, some those

of going and takes. lots there's puts be to So

growing won't We've over gross be the hard be really a it got margin years, next to of a number margin. time. journey linear that I do gross that's that ours. of a pushing big improvement focus So over drive But see to

pedals the the about up, SG&A Our some not I tens big it's over could not points, It's out X.X%, XXs a the could mean is R&D bit a back, mover. incremental or a basis you, through of time in focusing drift on be in on of bigger on of basis I think volume. level I based -- for points. going also across remind growth coming driver gross And is the we of sure, of I'm margin leverage future is them. see working volume. But drop little margin margin. could and driver X.X%. expansion I a growth driving as get step to because high just in it down both drift But

I'll of see specific. don't corner in I that Julian. little back have to the and Day towards anyway, we out So as lot bit to think this as playing this think host the point. clarity investors 'XX, We'll that's the more an lay laying end kind turn come today, that's I see at a a much more But a clearly out math out. today, in Investor future the the more I of itself little and February, get more clearly investors it we'll I way

top there. That's helpful. just line And just circling your back on comment

moving half through second point organic year-on-year. you're So a at about growth of sort of the

X at you're environment of of next picking when about your Just those netting pruning year. And How NPIs items the about XX overall net thinking next the we over wondered looking are sort year. about this points the up think how demand XXX months? the versus of off you efforts into

into year. on GDP be. IPI in isn't in range the it's of going it's year. next Steps Again, around what the of year. ago. Look, should that's the next to. of X% in the X.X% range. kind organic this It's is the X%, market Again, where a X.X%, be a of middle set same up we couple year traveling little to the X.X%. running order bit months the aspiring happens X.X% for we

But we're semis, we consumer, early launched see with And order and we've in line. I including year kind we're look over products digits. signals magnitude of that as less still XX% single All matures, low on the in how all last. NPI, build, in terms I it's in think than this up days of back, So in accelerating We stepping numbers this were XX%. that electronics. rate auto of of launches overall, were marketplace. together, good at many peak that, performing the line that at trending

and will got to That year and and then to going growth start be get is to we've engine fruit into hit essential maybe rate again. moving our year, So bear That R&D of next to into improving outgrow market. 'XX. that the starting on to next end the

Are Do these We drive it. have got those growth. single on It training? losing And on to see people sales customers. distributors? which time correctly? We those better because pricing back I think conversation. it. coverage? the levers. And I our delivering selling on in of to structures? all which our right and field, to the And means not we market why we're OTIF what got that's force every business Do this we we really it's got opportunities? all a why the in doubled down in are work care we right day. get to of means it it lot have it have last force things will pieces know if of incentive the we've time on Do full to The came we've cross-sell say All earlier have today, gaps at The and right we we took earlier we sales and pull right

happen step you turn put growth. to it's the we'll That a time, 'XX. do we stuff These better 'XX, the all and lay that time is -- that efforts better on lever out not and and full. And going investors But clearly take we the pull should into quarter be would to lot see some and my So turn this nearest-term and is into more getting overnight. we can quarter as back as I together expectation.

Bank. with DeBlase Nicole to now next Deutsche go We'll

you more some or any divisions chunky portfolio could of businesses little are anything the comments what of be Maybe these smaller businesses beginning, just all that types bit guess review if at? Bill. like looking at there's the like And made considered noncore? I or of kind on a thoughts if on coming you're

fresh portfolio, this coming let Nicole, all lens innovation. and time, differentiate that X,XXX it for take as I'm me, question. is into those People lens on to about here innovation it's would to people do very Yes, purposely clear look last leverage what mean, step portfolio. XM, And the the mentioned win to I I that you I did thanks XM. going new the strategic think differentiates came at moment of interface. When expect, looking that to we would technology where at at the clear have technology we're it's company. But through the dispassion a join back. in that can Look, really because a the company customer me the very I is to been very to

really a versus we a So material to I'm really through that to the need that's of have in leverage investments we technology here. looking different looking And at can I'm signing solve that make lens and the can't. lens competitors capabilities and something others

overall report. a businesses them, of So There we are in small. when it notice If revenue. transact we few of won't the that and are have you points on a couple

perhaps there at talking other XM. not a has matrix, over owned but but investors I'm standing advantage and take year, parts to continues. Again, us relatively as turn But we what near I I do about things we thought belong looking could ones that it's the up our which of something start. be today, at it's in were a term front time, today. the of in of come looking aren't the It's us fit don't for portfolio small, So it's like I'll that that things time. And with that next our currently what expecting evaluation same by

we're couple early Nicole. very a deals early stages, direction in we So time. head pushing want it's right it's now, of over pretty a the but assessment. days, that on holistic But in very, We're the to

in on the see there? clear. And the And ability just on in you business any quarter? benefit from What to did happening guys Okay. activity Got China maybe stimulus XM's then That's it. trends. thoughts

here in mid-single of our the by driven digits in China much a we're It's market So it Year-to-date, automotive. higher less, third where bit about pretty sales. lot market. than little half, China. good line the the is Up more for in size pretty I or up us a that is about first quarter, a think, of in XX%, with, XX%

happens So both China in within of we for we for country outlook half see half a we reasonably as out ligand, And the happening of the China. be year, bullish forecast GDP of is next see is compete. year. But turn We'll be. team lot roughly driven we there, the by export bullish lot stays automotive. Roughly about is feel a our are China export, the to into corner there, pretty to what's on But around stimulus do to conversations lot read economy economy, good where for of our We're geopolitical there. on well. the what we're it there's we and overall performing of can activity, where the ability we'll a next get going issues as

the have than participant a ground, time on we think over good China. ability factories, I people strong We have X,XXX a X and to more in be

in, China, up in quickly to year-to-date. All just in were about Nicole, clarify. X% has The about strength just automotive. roughly XX% to electronics Nicole, organically. been up we're not Ex-electronics

[indiscernible] to open [indiscernible] is

hear very now? you come me through didn't Can clearly. Sorry,

hear we you. Yes,

looking and you here. working Sorry with to forward about that. Anurag, thanks, congratulations

into a little margin. Where in cost kind price this positive price of of going play spread margin back productivity are a delve to and wanted forward? gross algorithm And into bit that that? you does price expecting Just get more to to

seeing this I or half thereabouts. mean Well, plus we organic price. it's growth, It's about our minus more or question. or year, positive good less, a are X%

covering new it this, back We introductions see are back pandemic products on was marketplace. bit it is kind where I We spiking we bring into of particularly -- this a during the we step I year, little material there. But get product obviously, in were differentiated than we higher that inflation in that. drive pricing, do X and level should as pieces. expect as because, to were inflation pre-pandemic

well next an funds, a price. be kinds the forward price. net, to at discounts, at those et better we that all had so we're look very rebates, tightening I And we volume get pieces get pricing. some that as tie last to very, call volume think quite opportunity something is we've to discounts, think I we least market generated. I substantial. And inflation volume working opportunities to continue on. better gross should things, could made and between what to of year, that's cover able surgical rebates, cetera, I have pricing, that as But opportunity pricing got into to we've a as cost our just to be development comment material more hard on X time the to that in down

And inflation just about think driving. we in Steve, us to us of for cost is mentioned, productivity to kind clearly, X margin that driver are expansion that, and cover add net volume inflation the for operating way the just forward. terms forward, going the and should moving a The biggest that Bill to have, of leverage to we price our add on as the cost

be should expansion margin that in volume productivity drivers. So critical

would And that price you assume? that I from view productivity, separate as cost

correct. Yes,

In the bridge?

Yes.

about just productivity, what -- what's you R&D cost go like this not like good like doesn't guys and like talking going assuming leverage? the you got price the in forward? economy negative? like then is to your get headwind to like hell. the So going You're is wondering is the flat, SG&A if should is way a Like margins What headwind I'm

Yes.

is pieces. that, at forward. moving the lower you negative FX of even restructuring -- which last of which it's is a that X/X we basically move. But year, and essentially could reimbursement way to right, know over But volume, X/X course, the for down there, X came of the more, if which don't that So inflation the TSA that X/X of compared It's a net cost, it's which margin overall X/X productivity. of year, inflation there, see any shouldn't we you is look will wage see besides

biggest productivity inflation go going But more it's into little be bit more will the you lower the and restructuring be on to If potentially way which charges. It on depends being on going next FX. be and with to it's headwind volume the cost again, a side year, there it goes.

last of as one. labor percentage cost is Sorry, much again? your How a X

cost our close is billion. $X Labor percent as Yes. $XX Yes. billion. of $XX-ish to billion a to

Andy now next go Kaplowitz at We'll to Citi.

in of little you pricing Could think on talked the cycles. And the in there a first Good color make pricing. Could be segment? pricing consumer know your you is give you're morning, need that more historical terms segment, I in in you most in I elaborate improvement competitive think segment business? better. that into everyone. on first bit it's seeing to business us that you I what that you Can a maybe be out could that tends getting about you're focused

first XXX the on. keep about in points of be prioritization the So terms go into about it X% and points associated has to you QX XX portfolio consumer, basis mind, the half, But QX is head down back to less of third in working that then basis organic fourth were QX, we and to down about And the team in QX growth on in it's if quarter. in efforts with becoming some the headwind of negative it's trending perhaps positive quarter.

For single the full year, low digits. down

-- mostly it's USAC USAC a overall the business. For business, retail a

is basis about the XX USAC year, about points. down XX points down retail sales for basis So

is was introductions portfolio partly where that performing but line the to in with product home up parts -- improvement, sort good our we of had business. it's happen due in the you pretty in growth well in Command at new use that space that Strip pretty So the there. in trending Strips That and to quarter, they're sales retail some Command of look be. When the

bit flat The of a portfolio were parts weaker the to other were the down.

the positive It as of what months. terms the couple happens we holiday trend But into up But upon rate. its moving depends improvement. the So trend through in get the in good see in of they line season quarter. fourth going growth next home offset we improvement trends is all organic

Bill, then, And back. maybe stepping Helpful. just

growth through pushing right that on lot their strikes innovation. global are markets big it driving markets are how XM But now. there as just a maybe few focus that what about you right talked You've the innovation call are I growth to because would a me

a we're making markets process how earn of right where those have spending sure, about governance and going in value. we the time precious and to overall part we on actually can spend $X where billion lot R&D we're land we our developing our for where right win, to after yes, areas sure our strategic thinking a So it's focus as of

this, We focus focus team the the in is pushing big look, a this the mine, a have is a of strong on investment and spaces. team. return big And on of

investing come our we're to R&D part -- on but more we're So and at dollars. calculus that, of spending it's and certainly the lens the the that looking where or

go Linzey to next Securities. with We'll Mizuho Brett now

and Good to Arnurag. all, morning, welcome

come the efforts. to to back rationalization wanted Just

forward proceed think you we and point Or I was growth. Should point year, of leaving the the we advance quarter, just efforts? isolating headwind launches something the So new of next drag a as out some product X the is of simplification thinking another other in for and perhaps year be it it less point continue about here? and rationalization as

it declined should be year. going Brett, I mean No, substantially the year. into we'll next lap

geographic effect next a be little prioritization that we or see course shouldn't there'll things going on portfolio happen of drag significant bit the year. But of So for from in headwind into 'XX.

companies be haven't about -- talked year. do continue normal expect out, than It's less be our but intention much just 'XX of this in would And And you about going Anurag I to things. part would people replace something Our and you add practice I something, next that at speak intention into some not things likely this, do to our a results. take to really look your you as that that portfolio. at you year, our conversation so

And launching products, XX% next follow-up NPA All right. Makes year. of a just sense. then growth the new on the

the step-up? associated better to able you introductions and a R&D this are with spending repurposing to comensurate the where aimed are level be the of costs achieve base? at thinking level. Just those understand segment wanted Should we of Or

No.

So it's existing the spending base. within

it's corporate within after a is back about just R&D. fixes, kind a mean, incremental kind R&D X/X into there's that cost shift going it's things. our a go those of really a talk horizon see research, we we basic of happening. One things, extensions, about new into where in buckets. As and But are longer-term X/X 'XX, of X spend I couple X/X we where comes goes kinds There's that line all that's of more that's introductions. product things come reduction, technologies, we'll

year that's that above I around new where below introductions in dropped shift So business expect product of into is piece used That there's year, back part is some to Safety and some a and now business. large will 'XX product be it ago. A coming those going going on XX% up. is to It's our that last accelerate introduction pieces. between be it's around mostly going we're XX%, of in be business. XXXX of bucket just on investment the Electronics -- Transportation middle XX mentioned XX%. new and in our There But to XX% now product number up goes that XX%, products, line Industrial to minutes in this new new new is X/X reductions. To that, over through those bucket pieces we and that couple Consumer is money product middle drive be clear, on shifting the extensions

get is minute ago out investors get lay we're going we're into and as where I win, more we as a with that we about lot where future where occurring. We'll a just why next lion's we'll the next We the year. in investment. but of we what X information very share the and see it to those talked of think were can going part of coming introductions verticals that's we're more February. our and You'll that we really But investing, prioritize why, see in more numbers, into investing, into clearly not year, out the spend businesses, product launches other new

now We'll Fargo Joe Wells Securities. O'Dea to with next go

what well made. of what I any in targets call you clarification equipment the or months just as talked well look would there? little best-in-class next short X bit the it, your wonder as XX% comments more kind you elaborate of efficiency best-in-class of if And when can you like on terms XX over, about operating a of utilization, are

that is a fundamental this have metric. -- really Companies relatively Yes. Sure. concept. years. efficiency equipment over a many, implemented manufacturing, do it's new It's many Look, operating

about it, some but factories, into XXX, OEE. I to time about mean volume. have about it's We build those of the you the implemented actually machine that we assets And are can large it in that. takes do of our XX% XX% implement it the runs, factories, way

machine built And companies way actually reality be is the the runs. if look, XX% running XX%. of or it's best-in-class process, manual a not it's north that's are we into So that. The in should running, range

short of So well that. we're

where or more sites assets that, Is So it of once maintenance off, -- that's the look well, it first our us Is practices this allow idled poor underutilization? of at have what's holistic we're changeovers the that lot it out machine that on because implication capacity? expansion, is to is a possible, and were it's be back fro to theoretically do down? capacity? fundamental figuring sort utilization more also consolidate on capacity running of about based it's happens capital we XX% can the and utilization surge will gets But in matured, yet, how cells you or and that assets. handle metric we you Is to factories our certain the it we or there. It's spending complexity term, network and out volume. And network, volume than say, a longer come in talk a driving our

to So longer this as spending places. be term, at a make sure looking right capital we're in we should also way the

year-to-date. We've the has it how a of it's to we been So But really probably be done I'm in you drive get the year. really for team performing. as next We're proud of way of where factories. second fundamental we've quarter XX% 'XX, it started. measure And into looking months as last fundamental. what get it's couple a And of by will to will into mature got the that done you're at metric our

And electronics then wanted also ask just to trends. on demand

up think you digits. single organically commented high that I

spec some the into you a good like the tailwinds, growing in it seems earlier So year. later as year, at in still move but clip

whether seeing with there market, if taking any trending color electronics any or you're you're there what share the the pricing sort growth. out seeing advantage so is opportunities of And gain of with

Yes.

We wins. quarter. good. So the electronics some did back-in in was have pretty up Year-to-date

pretty I happens what trends growing fourth year. holiday and we're happens think at carefully into slightly higher next in the here watching market. the the quarter what than We're in going

larger in screens, you been things, created that drives So far. It we're into very in of pretty LCDs you look OLEDs pleased privacy our They're business. variety extend that sophisticated larger with devices. where then performance, electronic the so a displays the optical things we've and sophisticated of comes that into allow that like cars. are lot of That's films terms adhesives, gives other to going optical from can a what films things screen multilayer we've AutoE

It's a a it's as to allowing in well important electronics technology. whole. us So perform pretty

we like holiday the we'll year. So happens and the season, We're trends. happens see what next watching in what going into

and pretty pleased we're above the for doing part our But this spec-in at big in well we important doing that. been technology a moment, semiconductors outgrowing it's pretty well, but specific pretty wins a growing That's as the actually to us of well. trend and because the center, of market, not the have. electronics, It's with business way market. data in year, So -- pretty

comes line from the Ritchie of Joe next of Our question Sachs. Goldman

like demand think, curious that not at redesigning are of more your you I earlier thoughts holistically Bill, some in I'm X think the your make? focus bit you think across, businesses. on I forecasting Anurag. why what Welcome, initial kind honing And can were little a on of you entire this you portfolio point? then mentioned planning and just improvements across

where and across it's like where be back, are it's not delivering customers. want sitting go to, entire to portfolio. But to we it the gotten We're not full where to eventually be. will on-time this we needs proud stepping but Well, we're there to of where

inventory delivering not time, So days -- of same yet we're XXX we've time. got on on we're the at sitting

across to our ones. And fix at that at And factories, XXs us. on this? do wrong in ones running whole delivering in to We're run XX% And suppliers. chain. average how we're then so that measuring there's Supplier you running is largest in value and calculus a but there's the an at and XXs, low And utilization low in looking assets back it's average. something full you we're the on this the ring, the in go the time now roughly

happening to signal. the is how starts it demand it's up it's just manage with supply So XX%. And chain. you it. below what's of the through starts to flow front It And with that the XX% end

what on are to you level, to do hand produce to to based So This on and because we to then the stock very suppliers the the OTIF what on factory what has based lead does how incredibly their time on complicated. smoothly work whole at using translate tell tell chain that SKU performance, it's a logistics.

this forecast it we as what into where dug on of So signal. the is, is we reality good. is struggled and divisions full, to our really that couple not back fundamental a forecast accuracy it And time comes demand with in very of

at. It to takes are that them. tools available some that time analytical look to are starting there So we are implement

circumstances data to got look are the whole model. You've very what not or run having unique accuracy is into on a got building at SKU. That has factory process well. you've overlay cleanse, to cannot based forecast be run for a manual if you to a there good, your you right And ought well. not Is your the parameters

perform high, providers inventory Your available. will be won't your be suppliers logistics your won't

a run So it to smooth like has we to it's clock. And better here. opportunity running clearly, have do

As business, we'll need on. high of rest focus at where the the we But roll we yes, a as early the of is really through appropriate. degree model, divisions big looking that refine X really this out

it as time get here. roll out over success So will we

by super you'll of this for in I'm what opportunity for have That's Bill, curious, some think February, organization? the presents you helpful, detail. that Yes. do of kind sense type

from estimate that, we Yes. divisions But could the happen results would were couple the We'll pieces. roll they're estimate divisions, of going to in as what's not out we to small like February, know -- by divisions. it can of other probably we certainly big

think talk I bit So yes, to of go, a can forecast a more which lot accuracy, tell to sort where nice is me want little you but we it's lay to we going out the cost delivery on it's in And get to how inventory of connect can mature area, further this we particular performance, about I kind think performance, as dots affect level. this Joe. about

next of Snyder Our from . Stanley. Chris Morgan comes line question of the

call, in 'XX a growth about better be of excess half 'XX. question, the growing you should into Bill, you into prior I here. back how believe in last about and the to on maybe talked you talked And the of business GDP. For think

just the just you that markets back end market time? of as we simply function is Or kind to in assumption are just that innovation end an takes half you allow investments So a start and it consumer that going making the 'XX outgrowing also the of to is maybe served better the see that's the there that into of get growth? pickup guys

behavior. Chris, consumer crystal be production, X.X So X.X. GDP, looking last of this are prognosticators on at not is it was look I industrial any our think better than of with at I various for happens predicted IPI was terms what in there end what out to predicted going the and year back ball at year, the what

doing happen X.X grow market, to we think sure what year are these a or out. with in or out powerful that macro indicators year the X%. market Look, at to So years all first doing might predict got this the the job that of, about not I'm and good we're I with

X% think machine levers. the actually One, be X want to comes R&D better. Without that time, be, into is running. performing grow your As I it, we've on conference, frame these time last putting said at to we it not this got where I get to and and a

time. That's As I it say take going today. again mentioned then, I'll to

Our is develepment on a and development a or developing product. launching commercializing cycle year time, new our more

So lot that selling, get at take to that there's which a a we've to aggressive more frame some a near-term that things, at got and pricing, time this other there's initiatives today, that's piece going that's these that, customer we together, you sort that kind it to before interface, is has run I'm standing as over put the more turn all today, and I walk where When I stuff describe we'll Chris. want to growing that more of time. here at than GDP effect. speak that's or of around. But

we've add, just Yes. consistently X And to grown quarters X%. right,

earlier, color all clip we said at pretty As time operating said, more we there. To we'll we over margin give a go Bill the can as healthy question by levers grow have. given Steve's

as expense, interest year, into aware, As do lower we from higher headwinds go next certain income. pension we you are

It that Of year. more course, $X.XX that's through factory, the in that, see from around we what's along items. But I driving the in and look year had to chain, with at along mitigate margins productivity can supply just line we with confidence we that if discussion tailwind, the the operating looking below-the-line kind charges. cost we see terms the driving of all the of us share reduction the and headwind with a we'll next repurchase, at top details give while indirect restructuring this gives all growth, expand specific but

pruning. the leave, and it? that I whatever if the nothing maybe follow up Not come no that. some fair then company it to business least or understand of organic SKUs very or -- go. exit can just lines organic more exit? would in assume decides at I product certain for terms paid And maybe portfolio could to of have they Appreciate Is on sizable

churn, that and all -- things for. at growth it growing in to you products bring natural business, of we as going SKUs go be, on contributions I obsolete that's sort pruning to over should portfolio normal absorbed market the terms organic part Yes. should may a other that think That that be Look, your there's of part time, be out. new of normal within of need that

think inorganic than -- that hard an So effects, all selling turn we we're geographies this cash business all about just we distinct as pointed pieces. I that a portfolio get within out, less from We'll a to today on business, that. I is the shifting your We'll SKUs question Chris, value things going look paid probably sure look those and of inside And really on more think that and talk as company going XM. But you we'll that I would at assumed kind on make was said, at have organic. like I like year, which dilution the for up effects, exit.

of the And Markets. question line last Capital from our comes RBC Dray Deane of

in office. in, Thanks and to the XM and back on it'd operationally to both paper, the local fitting morning, but came culturally, employees be to Bill, Thank the you. everyone. your thoughts Anurag. Good to challenges Thank up interesting get you're the this hear welcome for facing,

love remote to been than You some you've most would I companies. color all hear there. fully have longer for announced but some initiatives, know

the to is at we you flexibility so some is obese innovate. our site our Part individuals for opportunity in What customers. flexibility we've largest Well, need look, to going maintain on It's you on direction solve I Friday. have moved in know to it's really a our culture, wherever to our team. of right Maintaining than our Teams an the like table is another that -- Zoom a build done opportunity dig most report and workforce problem to gives in that. important continue to do and to better past. be really X it's on step. I people. We've our it This to across look a business. think employees, grow as that. But me. us the Monday Thursday over we us is or And allowing to in need I I mean some our in in solve Tuesday to solve an think We for need lot sites that our for in think of or able other workforce. through this our be can some way to customers senior we're those problems the relationships, asked problem they I format flexibility with build important person. We're better innovate and and from

a of at on people that's bringing So Center. -- why XM sites little more at bit we're here sort leaning at our in larger back including

about last lot Will of it? And measures there? in it. one bringing away be of but new product R&D. had vitality question. a you one XM just What's the went the today introductions, new Is at product that efficiencies then your Got from index? thought back and then A time, discussions

aging, reasons why we've be from an back to whatever. XX% is time we oversold to the know in portfolio it. pulled to We product Because NPIs marketplace our down But some the the comp up I that. metric. at to going net where pulled or it's No, and know this built We talk that it. to talked as year, or don't have of from come I is products I'm sure. into detail many away at happy year. The important new marketplace. effect reality there a last introducing over about was how that for is metric get want we're

the to We are on a it's X-year double there, that XX%. on my is over but XX%, NPVI basis going not marketplace. mind. range. I'm when back running the companies We Our innovative have just more on fresh for more be get that's to X XX-XX super say digits, need we used offerings in to that

drives or at here don't to Index. that happening company. I investors That happens terms driving to we employees ought it, other to innovation digit over important. But we be double overuse talk one with in just them. of it's are happy to because there's So it lots metric, that the in of about And effective I'm Vitality why the metrics, of than terms to want low be becoming with of measures what's think of better in I time

turn Bill the concludes question-and-answer to over call. our closing the I now comments. this for call will some And portion of conference Brown back

dedication, for our very January I shareholders a investors importantly of host last the very, the asking hard a look behalf very as thank into in an forward year, good thank our results. much Day very good February their today on to so February, everybody. the in all week our and we the like I Have you and Well, we you the late here Minneapolis. And speaking throughout quarter, number late with customers of Investor joining analysts of issue of much. throughout all QX of to Thank and as probably day, XMers work questions. to all for get want their

does that gentlemen. today's conclude your for This We you, and and line time. Thank thank ask disconnect please call. at you you this participation your conference ladies