Illinois Tool Works Inc (ITW) 2024 Q2 法說會逐字稿

Good morning. My name is Audra and I will be your conference operator today. (Operator instructions)

早安.我叫奧德拉，今天我將擔任你們的會議操作員。 （操作員說明）

Thank you. Erin Linnihan, Vice President of Investor Relations, you may begin your. conference.

謝謝。艾琳林尼漢 (Erin Linnihan)，投資者關係副總裁，您可以開始了。會議。

Thank you, Audra. Good morning, and welcome to ITWs second quarter 2024 conference call. Today, I'm joined by our President and CEO, Chris O'Herlihy; and Senior Vice President and CFO, Michael Larson. During today's call, we will discuss ITW second quarter financial results and provide an update on our outlook for full year 2024.

謝謝你，奧德拉。早安，歡迎參加 ITW 2024 年第二季電話會議。今天，我們的總裁兼執行長 Chris O'Herlihy 也加入了我的行列。資深副總裁兼財務長 Michael Larson。在今天的電話會議中，我們將討論 ITW 第二季財務業績，並提供 2024 年全年展望的最新資訊。

Slide 2 is a reminder that this presentation contains forward looking statements. We refer you to the company’s 2023 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations.

投影片 2 提醒您，本簡報包含前瞻性陳述。我們建議您參閱該公司向 SEC 提交的 2023 年 10-K 表格以及後續報告，以了解有關可能導致實際結果與我們的預期存在重大差異的重要風險的更多詳細資訊。

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

本簡報使用了某些非 GAAP 衡量標準，而這些衡量標準與最直接可比較的 GAAP 衡量標準的調整結果包含在新聞稿中。

Please turn to slide 3 and it is now my pleasure to turn the call over to our President and CEO, Chris O'Herlihy. Chris?

請轉到幻燈片 3，現在我很高興將電話轉給我們的總裁兼執行長 Chris O'Herlihy。克里斯？

Thank you, Erin, and good morning, everyone. As you saw on our press release this morning, during the second quarter, the short cycle demand environment continued to moderate across our portfolio.

謝謝你，艾琳，大家早安。正如您在今天早上的新聞稿中看到的那樣，在第二季度，我們的投資組合的短週期需求環境繼續緩和。

At the total company level, second quarter revenues came in approximately 1 percentage point or $50 million below what they would have been had demand held at the level we were seeing exiting the first quarter.

在公司整體層面上，第二季的營收比第一季需求維持在水準時的營收低約 1 個百分點，即 5,000 萬美元。

Second quarter organic revenue was down in 3 segments with declines year-over-year in CapEx related products such as Welding, Test & Measurement and Construction. These declines were offset by revenue growth in 4 segments, resulting in overall flat organic growth year-over-year at the total company level as compared to our end markets, which we believe were down in the low single digits.

第二季三個領域的有機收入均下降，其中焊接、測試與測量以及建築等資本支出相關產品較去年同期下降。這些下降被 4 個細分市場的收入成長所抵消，導致與我們的終端市場相比，整個公司層面的整體有機成長同比持平，我們認為終端市場下降了較低的個位數。

As usual, as the quarter progressed, the ITW team executed well on all the elements within our control. As evidenced by record second quarter operating margin, which improved by 140 basis points, 26.2%, supported by 140 basis points of benefit from enterprise initiatives. Operating income grew 4.5% to a second quarter record of $1.05 billion and GAAP EPS came in at $2.54, up from $2.48 last year.

與往常一樣，隨著本季度的進展，ITW 團隊在我們控制範圍內的所有要素上都表現良好。第二季營業利潤率創下紀錄，在企業舉措帶來的 140 個基點的推動下，營業利潤率提高了 140 個基點，即 26.2%。第二季營業收入成長 4.5%，達到創紀錄的 10.5 億美元，公認會計原則每股盈餘 (GAAP EPS) 為 2.54 美元，高於去年的 2.48 美元。

As per our normal practice, we are adjusting our full year guidance in line with demand levels in our businesses as they exist today. Current run rate exiting Q2 projected through the remainder of the year results in about flat organic revenue for the full year. The moderating demand is partially offset by stronger margin performance and we are raising our margin guidance to 26.5% to 27%. Factoring in both of these elements, lower market demand and stronger margin performance, we are lowering the midpoint of our EPS guidance by 1% as we narrowed the range to $10.30 to $10.40.

按照我們的正常做法，我們正在根據當前業務的需求水準調整全年指導。目前第二季的運行率預計在今年剩餘時間內將導致全年有機收入基本持平。強勁的利潤率表現部分抵消了需求的放緩，我們將利潤率指導提高至 26.5% 至 27%。考慮到市場需求下降和利潤率表現增強這兩個因素，我們將每股收益指引的中點降低了 1%，將範圍縮小至 10.30 美元至 10.40 美元。

While the combination of moderating manufacturing CapEx demand and lower automotive build forecast for the second half has us operating in a challenging near term environment. We will continue to drive our usual high quality execution on all the elements within our control, while remaining focused on managing and investing to maximize the company's growth and performance over the long term, as we build above market organic growth fueled by customer backed innovation into a poor ITW strength.

雖然製造業資本支出需求放緩和下半年汽車製造預測降低，使我們在充滿挑戰的近期環境中運作。我們將繼續在我們控制範圍內的所有要素上推動我們一貫的高品質執行，同時繼續專注於管理和投資，以最大限度地提高公司的長期成長和業績，因為我們在客戶支援的創新的推動下建立了高於市場的有機成長ITW實力較差。

In this regard, we are very encouraged by the progress we are making on customer back innovation in each of our divisions.

在這方面，我們對每個部門在客戶支援創新方面的進展感到非常鼓舞。

In concluding my remarks, I want to thank all of our ITW colleagues around the world for their exceptional efforts and for their dedication to serving our customers with excellence and driving continuous progress on our path to ITW's full potential.

在結束演講時，我要感謝世界各地的所有 ITW 同事所付出的傑出努力和奉獻精神，為我們的客戶提供卓越的服務，並推動我們在充分發揮 ITW 潛力的道路上不斷進步。

I will now turn the call over to Michael to discuss our second quarter performance in more detail, as well as our updated full year guidance. Michael?

我現在將把電話轉給邁克爾，更詳細地討論我們第二季的業績，以及我們更新的全年指導。麥可？

Thank you, Chris, and good morning everyone. In Q2, revenue declined 1% with organic revenue down 0.1%, essentially flat year-over-year, and a slight improvement from being down 0.6% in Q1.

謝謝你，克里斯，大家早安。第二季度，營收下降 1%，其中有機收入下降 0.1%，年比基本持平，較第一季下降 0.6% 略有改善。

As Chris said, demand moderated sequentially as total company revenues grew 2% from the first quarter to the second quarter, a point below our historical run rate growth of 3%. Faced with moderating demand, the ITW team as usual did a great job in terms of reading and reacting to the environment and delivered record margin and profitability performance in the second quarter as evidenced by 4.5% operating income growth and operating margins of 26.2%, an improvement of 140 basis points as enterprise initiatives were once again the largest margin and profitability driver contributing 140 basis points this quarter with more to come in the second half.

正如克里斯所說，需求連續放緩，公司總收入從第一季到第二季成長了 2%，低於我們 3% 的歷史運作率成長率。面對需求放緩，ITW 團隊一如既往地在解讀和應對環境方面表現出色，第二季度實現了創紀錄的利潤率和盈利表現，營業收入增長 4.5%，營業利潤率達到 26.2%，提高了140 個基點，因為企業計畫再次成為最大的利潤和獲利驅動因素，本季貢獻了140 個基點，下半年還將貢獻更多。

GAAP EPS of $2.54 increased 2% or 5%, excluding a 2023 onetime tax item. Our free cash flow was $571 million, which was a 75% conversion of net income, slightly below our historical conversion in the 80% range, as we continue to focus on reducing our inventory months on hand to pre pandemic levels without impacting customer service levels.

GAAP 每股盈餘為 2.54 美元，成長 2% 或 5%（不含 2023 年一次性稅項）。我們的自由現金流為5.71 億美元，相當於淨利潤的75%，略低於我們歷史上80% 範圍內的轉換率，因為我們繼續致力於在不影響客戶服務水平的情況下將現有庫存月數減少到大流行前的水平。

We repurchased $375 million of our own shares during the quarter as planned and the effective tax rate was 24.4% compared to 21.4% in the prior year, which lowered EPS by $0.10. In addition, foreign currency translation was approximately a $0.05 headwind year-over-year. In summary, strong execution and Q2 results as the impact of a moderating short cycle demand environment was offset by strong margin and profitability performance.

我們在本季按計畫回購了 3.75 億美元的自有股票，有效稅率為 24.4%，而前一年為 21.4%，這使 EPS 降低了 0.10 美元。此外，外幣折算年減約 0.05 美元。總之，由於短週期需求環境放緩的影響，強勁的執行力和第二季業績被強勁的利潤率和獲利能力表現所抵消。

Please turn the slide 4 for a look at organic growth by geography. The 2% decline in North America was an improvement over the first quarter's 3% decline. Europe grew 1% and Asia Pacific grew 3%, with China up 5%.

請轉動幻燈片 4 查看按地理位置劃分的有機增長。北美地區下降 2%，較第一季 3% 的下降有所改善。歐洲成長 1%，亞太地區成長 3%，中國成長 5%。

Moving on to segment results, the automotive OEM segment delivered flat organic growth in the second quarter against a tough comparison of plus 16% in the year ago quarter. North America was down 4%. Europe was down 2% and China was up 7%. In the first half, automotive builds were flat and our Automotive OEM segment grew 2% above market. For the full year, we continue to expect solid above market growth with our typical penetration gains of 2% to 3% and continued outgrowth in China.

轉向部門業績，汽車 OEM 部門在第二季度實現了持平的有機增長，而去年同期則增長了 16%。北美地區下跌 4%。歐洲下跌 2%，中國上漲 7%。上半年，汽車產量持平，我們的汽車 OEM 業務成長高於市場 2%。就全年而言，我們繼續預計將實現高於市場的穩健成長，典型的滲透率成長為 2% 至 3%，且中國市場將持續成長。

In our guidance, we have now factored in the most recent automotive build projections, which have declined to negative 2% for the full year. As you may recall, when we issued our initial guidance in February, Automotive builds were expected to be flat for the year.

在我們的指導中，我們現在已考慮了最新的汽車製造預測，全年預測已降至負 2%。您可能還記得，當我們在二月發布初步指導意見時，預計今年的汽車產量將持平。

On a positive note, this segment delivered strong operating margin performance of 19.4%, a 260 basis points improvement, as we continue to work towards our goal of achieving operating margins in the low to mid 20s by 2026.

從積極的方面來看，該部門的營業利潤率表現強勁，達到 19.4%，提高了 260 個基點，我們將繼續努力實現到 2026 年實現營業利潤率在 20 多歲左右的目標。

Turn to slide 5. Food equipment organic revenue grew 2.5% against the comparison of plus 7% in the second quarter of last year. Equipment grew 1% and service grew 5% against the comparison of plus 16% last year. By region, North America increased 2%, with service up 3%. Organic growth in the institutional market was up mid single digits and the retail market was up high single digits. International revenue was up 3.5% led by Europe.

轉向幻燈片 5。設備成長 1%，服務成長 5%，而去年則成長 16%。按地區劃分，北美成長 2%，其中服務成長 3%。機構市場的有機成長為中個位數，零售市場則為高個位數。國際收入成長 3.5%，其中歐洲領先。

As we talked about last quarter, the current margin performance reflects the fact that we're making focused capacity investments in the first half of 2024 to support and accelerate continued above market organic growth in our very attractive service business. Looking forward, we expect margins to continue to improve sequentially as we go through the year.

正如我們上季度所談到的，目前的利潤率表現反映了這樣一個事實：我們將在2024 年上半年進行集中產能投資，以支持和加速我們非常有吸引力的服務業務持續高於市場的有機成長。展望未來，我們預計今年的利潤率將持續改善。

Turning to Test & Measurement and Electronics, organic revenue was down 3% with continued softness in semiconductor, electronics and CapEx sensitive end markets. Both Test & Measurement and Electronics were down 3% in the quarter.

至於測試與測量和電子產品，由於半導體、電子產品和資本支出敏感的終端市場持續疲軟，有機收入下降了 3%。測試與測量及電子產品本季均下降 3%。

Moving on to slide 6, Welding was down 5% in Q2, as Equipment declined 5% and Consumables were down 3%. By region, North America declined 6% with industrial sales down 7% and the commercial side down 6%. International grew 3% with some strength in Europe.

繼續看投影片 6，焊接在第二季下降了 5%，其中設備下降了 5%，消耗品下降了 3%。按地區劃分，北美下降 6%，其中工業銷售下降 7%，商業銷售下降 6%。國際成長 3%，其中歐洲成長強勁。

Operating margin was 32.9% with a solid contribution from enterprise initiatives. Organic revenue in Polymers & Fluids increased 3%, led by Polymers up 10% and Fluids was up 4%. Automotive aftermarket was down 2% in the quarter. On a geographic basis, North America declined 4% and International grew 13%. Operating margin of 28.2% improved more than 200 basis points.

營業利益率為 32.9%，這得益於企業舉措的強勁貢獻。聚合物和流體領域的有機收入成長了 3%，其中聚合物成長了 10%，流體成長了 4%。汽車售後市場本季下降了 2%。從地理來看，北美地區下降了 4%，國際地區成長了 13%。營業利益率為 28.2%，提高了 200 個基點以上。

Turn to slide 7. Demand trends in Construction Products continue to be challenging on a global basis as organic revenue declined 4% in Q2 in a market that we believe is down in the mid to high single digits. North America was down 2% as the residential and renovation business was down 2% and commercial was down 9%.

轉向幻燈片 7。北美地區下降了 2%，其中住宅和裝修業務下降了 2%，商業下降了 9%。

International markets remain soft as Europe was down 7% and Australia, New Zealand was down 4%. Finally, Specialty products had a strong quarter with organic revenue growth of 7% due to a significant strength in our Aerospace equipment division as well as pockets of increased demand across our portfolio. As a result, International was up 10% and North America was up 5%.

國際市場依然疲軟，歐洲下跌 7%，澳洲、紐西蘭下跌 4%。最後，由於我們航空航天設備部門的強大實力以及我們產品組合中需求的增長，特種產品季度表現強勁，有機收入增長了 7%。結果，國際上漲 10%，北美上漲 5%。

As previously discussed, results can be a bit choppy as we continue to work to reposition the Specialty segment for consistent above market organic growth, including strategic portfolio work and more significant product line simplification, which included 230 basis points in Q2. Operating margin improved 590 basis points to 31.9% with strong contributions from enterprise initiatives and operating leverage.

正如前面所討論的，結果可能會有點不穩定，因為我們繼續努力重新定位特種業務部門，以實現持續高於市場的有機增長，包括戰略投資組合工作和更重要的產品線簡化，其中包括第二季度的230 個基點。由於企業措施和營運槓桿的強勁貢獻，營運利潤率提高了 590 個基點，達到 31.9%。

With that, let's move to slide 8 for an update on our full year 2024 guidance. Despite a challenging first half macro demand environment, the ITW team found a way to deliver solid operational and financial results. And excluding one-time items, we grew operating income 4% in the first half as margins improved by 130 basis points to 25.8% with 140 basis points from enterprise initiatives.

接下來，讓我們轉到投影片 8，了解 2024 年全年指引的最新情況。儘管上半年宏觀需求環境充滿挑戰，ITW 團隊還是找到了實現穩健營運和財務表現的方法。不包括一次性項目，我們上半年的營業收入成長了 4%，利潤率提高了 130 個基點，達到 25.8%，其中企業計畫提高了 140 個基點。

GAAP EPS was up 10%, up 5%, excluding onetime items. Looking ahead to the second half in our updated guidance, we do not expect the short-cycle demand environment to improve. Per usual process, we are adjusting our full year guidance in line with conditions on the ground as they exist today. Current run rates exiting Q2 adjusted for typical seasonality and the most recent automotive build forecast protected through the remainder of the year would result in approximately flat organic growth for the year, in markets that we believe are down in the low single digits.

GAAP 每股盈餘成長 10%，不包括一次性項目，成長 5%。在我們更新的指引中展望下半年，我們預期短週期需求環境不會改善。按照通常的流程，我們正在根據目前的實際情況調整全年指導。第二季度的當前運行率根據典型的季節性因素進行了調整，而最新的汽車製造預測將在今年剩餘時間內得到保護，這將導致今年的有機增長大致持平，而我們認為市場的有機增長將下降到較低的個位數。

This compares to a prior organic growth guidance of 1% to 3% and impacts EPS by approximately $0.25. The lower top line guidance is partially offset by stronger margin and profitability performance, which is expected to continue into the second half, including a significant contribution of more than 100 basis points from Enterprise initiatives.

與先前 1% 至 3% 的有機成長指引相比，每股收益影響約 0.25 美元。較低的收入指引被更強勁的利潤率和盈利表現所部分抵消，預計這種情況將持續到下半年，其中企業計劃將做出超過 100 個基點的重大貢獻。

As a result, we raised margin guidance to 26.5% to 27% as we continue to make solid progress towards our goal of 30% operating margin by 2030. The higher margins impact EPS favorably by about $0.1. The net of these two factors, as you saw this morning is that we lowered the top end of the range of our full-year GAAP EPS guidance to a new range of $10.30 to $10.40, which is a reduction of $0.15 or 1% at the midpoint from $10.50 to $10.35 with six months to go in the year.

因此，我們將利潤率指引上調至26.5% 至27%，因為我們繼續朝著2030 年營業利潤率達到30% 的目標取得紮實進展。 。正如您今天早上所看到的，這兩個因素的淨值是，我們將全年 GAAP 每股收益指導範圍的上限降低至 10.30 美元至 10.40 美元的新範圍，即減少了 0.15 美元或 1%。年中還有六個月，中點將從10.50 美元升至10.35 美元。

To wrap things up, we delivered a solid Q2 and first half in a challenging demand environment, and we've updated our full year guidance per our usual process to reflect current levels of demand. Given the strength of our competitive advantages, the resilience of the ITW business model and our diversified high-quality portfolio, we are well positioned for whatever economic conditions emerge through the second half of the year.

總而言之，我們在充滿挑戰的需求環境中實現了穩健的第二季和上半年業績，並且我們按照常規流程更新了全年指引，以反映當前的需求水準。鑑於我們強大的競爭優勢、ITW 業務模式的彈性以及我們多元化的高品質投資組合，我們已準備好應對下半年出現的任何經濟狀況。

With that, Erin, I'll turn it back to you.

有了這個，艾琳，我會把它還給你。

Thank you, Audra, will you lease open the line for questions?

謝謝您，Audra，可以撥打電話提問嗎？

(Operator instructions) Andy Kaplowitz, Citigroup.

（操作員指示）Andy Kaplowitz，花旗集團。

Hey, good morning, everyone. Chris and Michael, you continue to have unusually strong results in Specialty products in Q2 after I think you said in Q1 is bit unusual and Q2 would normalize. I know you mentioned aerospace. I don't think I've heard that particular business mentioned before. So could you give us more color on what's going on there? And what is the probability that segment could continue to outperform?

嘿，大家早安。克里斯和邁克爾，在我認為您在第一季度表示有點不尋常並且第二季度將正常化之後，您在第二季度的特種產品方面繼續取得了異常強勁的業績。我知道你提到了航空航天。我想我以前沒有聽說過這個特定的業務。那麼你能給我們更多關於那裡發生的事情的資訊嗎？該細分市場繼續跑贏大盤的機率有多大？

Yes. So Andy, we've had a, as you've outlined a very solid H1 here in Specialty. There's a few different things going on. I think strength in aerospace has been a feature through the first half. There is some order pockets of strong demand elsewhere. Obviously, we had favorable comps in Specialty and we have also benefited from the timing of some orders, particularly in Q1 for some of our European equipment businesses.

是的。安迪，正如您在專業領域中概述的那樣，我們已經有了一個非常可靠的 H1。有一些不同的事情正在發生。我認為航空航太領域的實力是上半年的特色。其他地方也有一些需求強勁的訂單。顯然，我們在專業領域擁有有利的競爭優勢，而且我們也受益於一些訂單的時機，特別是我們的一些歐洲設備業務在第一季的訂單。

This is a segment that, we've got some strategic portfolio repositioning going on and a bit more than the normal kind of PLS that you'd see, more than maintenance much more strategic. It's going to be a bit of a drag on revenue for the full year we would say.

在這個細分市場中，我們正在進行一些策略性的投資組合重新定位，比您所看到的普通 PLS 多一點，比維護更具策略性。我們可以說，這將對全年收入產生一定的拖累。

We probably expect Specialty to be up just above flat, maybe flat to low-single digits for the full year. But the important thing here is that we're, the strong work that we're doing to really make this segment a 4% grower in the long term. And based on the progress that we've seen this year, we certainly believe we can do that.

我們可能會預期全年特種產品的成長將略高於持平，甚至可能持平至低個位數。但重要的是，我們正在做大量工作，真正使該細分市場長期成長 4%。基於我們今年所取得的進展，我們當然相信我們可以做到這一點。

Very helpful. And then Chris and Michael, you mentioned that demand continues to moderate in Q2, but could you give some more color regarding the cadence of the demand? You saw demand stabilize at lower levels across your short-cycle businesses? Or would you say it's still getting worse.

非常有幫助。然後克里斯和邁克爾，您提到第二季度需求繼續放緩，但您能否就需求節奏提供更多資訊？您看到您的短週期業務的需求穩定在較低水準嗎？或者你會說情況還在變得更糟。

And then with the understanding that you're forecasting the exit rate of Q2, you do have much easier comps in the second half. So just at the enterprise level, are you baking in any conservatism or is it really just on run rates?

然後，根據您預測第二季退出率的了解，您在下半年的比較確實會容易得多。那麼，就企業層面而言，您是否持保守態度，還是真的只是按運行率行事？

Well, so I think in terms of the cadence, I think, we saw, as we were going through the quarter, as demand continued to moderate as the quarter progressed. And by segment, definitely auto builds came down, the CapEx businesses that Chris mentioned, Test & Measurement and Welding, we're maybe a little bit more impacted than some of the other businesses. I think on a positive note, I just might add that June also had really strong margin performance. So I think we've got some good margin momentum heading into the second half.

嗯，所以我認為就節奏而言，我認為，我們在整個季度中看到，隨著季度的進展，需求繼續放緩。以細分市場來看，汽車製造肯定有所下降，克里斯提到的資本支出業務、測試與測量以及焊接，我們可能比其他一些業務受到更大的影響。我認為從正面的角度來看，我可能會補充一點，六月的利潤率表現也非常強勁。因此，我認為下半年我們有一些良好的利潤動能。

In terms of the back half of the year, as we said for our typical process this is based on current levels of demand that we're seeing in these businesses adjusted for seasonality. We do have, as you recall, some more favorable comparisons here in the second half of the year.

就今年下半年而言，正如我們在典型流程中所說，這是基於我們在這些業務中看到的當前需求水平，並根據季節性進行了調整。正如您所記得的，我們在今年下半年確實有一些更有利的比較。

If you look at last year, we were up 4% in the first half of '23 and were flat in the second half of '23. So the comparisons definitely get easier. We also have the benefit of two additional shipping days in the back half, one in Q3 and one in Q4. And then the last thing I would add is we have updated the automotive build forecast as we saw a decline there from previously about flat for the year to down 2%, and we expect to outgrow that per typical 2% to 3% and we continue to outgrow by a little bit more than that in China as we've talked about previously. So those are all the elements that kind of went into the top-line guidance.

如果你看看去年，我們在 23 年上半年成長了 4%，在 23 年下半年則持平。所以比較肯定會變得更容易。我們也受惠於後半段額外的兩個出貨日，一個在第三季度，一個在第四季。我要補充的最後一件事是，我們更新了汽車製造預測，因為我們看到今年的汽車製造預測從之前的持平下降到了2%，我們預計成長速度將超過通常的2% 到3%，我們將繼續正如我們之前談到的，成長速度比中國快一些。這些都是納入頂線指導的所有元素。

I might just add, if you look at the reduction one to three organic now to about flat, and you look at kind of the flow-through on that. That's about a 20% decremental, just given how strong the margin performance is and how flexible our cost structure is so that we can continue to kind of read and react to whatever demand environment we're dealing with in the second half.

我可能只是補充一下，如果你看看現在從一到三個有機物減少到大約持平，然後你看看它的流通情況。考慮到利潤率表現有多強勁以及我們的成本結構有多靈活，我們可以繼續了解下半年我們面臨的任何需求環境並做出反應，這大約減少了 20%。

Appreciate all the color.

欣賞所有的顏色。

Sure.

當然。

Scott Davias, Melius Research.

斯科特戴維斯，Melius 研究中心。

Hey, good morning, guys.

嘿，早上好，夥計們。

Morning.

早晨。

Morning.

早晨。

I know I probably asked this in prior quarters, but M&A is, I assume no change in strategy there, more bolt-ons or we have heard of some larger assets that are going to become available, would you guys be comfortable casting a wider net there?

我知道我可能在前幾個季度問過這個問題，但併購是，我認為那裡的策略沒有改變，更多的補充或我們聽說一些更大的資產將變得可用，你們願意撒更廣泛的網嗎那裡？

Yes. So Scott, I think our posture on M&A hasn't changed much. I mean, as we shared at our Investor Day, we've pretty disciplined portfolio management strategy, and we're certainly staying consistent to that. From our standpoint, we have a pretty clear and well defined view of what fits our strategy and our financial criteria.

是的。史考特，我認為我們對併購的態度沒有太大改變。我的意思是，正如我們在投資者日分享的那樣，我們有非常嚴格的投資組合管理策略，我們肯定會保持一致。從我們的角度來看，我們對什麼適合我們的策略和財務標準有一個非常清晰和明確的看法。

So for us, it's a case of just finding the right opportunities. Very much focused on high-quality acquisitions that can extend our long term growth potential, growing at a minimum of 4%-plus at high quality. We've been able to leverage the business model to improve margins. So we review opportunity certainly on an ongoing basis, pretty selective given what we believe to be pretty compelling organic growth potential that we have in our core businesses.

所以對我們來說，這只是尋找合適的機會。非常注重高品質的收購，這些收購可以擴展我們的長期成長潛力，以高品質的方式實現至少 4% 以上的成長。我們已經能夠利用商業模式來提高利潤率。因此，我們肯定會持續不斷地審查機會，考慮到我們認為我們的核心業務具有相當引人注目的有機成長潛力，我們非常有選擇性。

And if I go back to the MTS acquisition from a couple of years ago, that was certainly an acquisition that ticked all the boxes and only a couple of years in here and already turning out to be a great idea of ITW business to the extent that we can find acquisitions like that, then we will certainly be very, very active.

如果我回顧幾年前對 MTS 的收購，那肯定是一次符合所有條件的收購，而且只進行了幾年，而且已經成為 ITW 業務的一個好主意，以至於我們可以找到這樣的收購，那麼我們肯定會非常非常積極。

Okay. Fair enough, Chris. And then I was just looking back at your investor deck on your growth, your long-term growth targets is 4 to 7 at 2 to 3 percentage points of that were coming from customer-back innovation and you did mention that in your prepared remarks, but are you still confident that you can drive that kind of growth from customer-back innovation? It seems seems like a lot to me, but you guys would have a better feel for that.

好的。很公平，克里斯。然後我只是回顧一下你的投資者對你的成長的看法，你的長期成長目標是 4 到 7，其中 2 到 3 個百分點來自客戶支持創新，你在準備好的演講中確實提到了這一點，但您仍然有信心能夠透過客戶支援的創新來推動這種成長嗎？對我來說似乎很多，但你們會有更好的感覺。

Yes, it was just Scott, that we're even more confident now than we were at Investor Day. Our confidence has certainly continued to grow, and we're very encouraged by what we're seeing in our businesses. It's one of the reasons that we believe that we're outperforming our end markets right now. And our view on customer-back innovation is that we're going to lean into customer-back innovation and the same way with a similar approach that we utilized in really reinvigorating front-to-back 80,20 in the last phase of our enterprise strategy, in terms of our intention around it, in terms of the rigor and capability build that's going on all over this company right now.

是的，斯科特說，我們現在比投資者日更有信心。我們的信心無疑在持續增強，我們對業務中所看到的情況感到非常鼓舞。這是我們相信目前表現優於終端市場的原因之一。我們對客戶支援創新的看法是，我們將傾向於客戶支援創新，並以與我們在企業最後階段真正重振從前到後 80,20 時使用的類似方法相同的方式戰略，就我們圍繞該戰略的意圖而言，就該公司目前正在進行的嚴謹性和能力建設而言。

And in doing so, increase our contribution from what was approximately 1% in 2019 to north of 2% today. And what will be north of 3% in the not-too-distant future. So everything we see on customer-back and the work we're doing in our divisions gives us an even stronger sense of confidence that this is going to be a really impactful in terms of our ability to grow 4%-plus in the long term.

在此過程中，我們的貢獻從 2019 年的約 1% 增加到今天的 2% 以上。在不久的將來，這一數字將超過 3%。因此，我們在客戶支援方面看到的一切以及我們在各個部門所做的工作讓我們更有信心，這對於我們長期增長 4% 以上的能力來說將產生真正的影響。

Okay. Thank you, Chris. I will pas it on. I appreciate it.

好的。謝謝你，克里斯。我會把它傳遞下去。我很感激。

Thank you.

謝謝。

Tami Zakaria, JPMorgan.

塔米·扎卡里亞，摩根大通。

Hi, good morning. Thank you so much. So my first question is North America saw a negative, I think you said 2% organic growth, while other regions are positive. Are you still seeing destocking headwinds in North America or any other region or is the market softening now more a function of just demand rather than destocking?

嗨，早安。太感謝了。所以我的第一個問題是，北美出現了負成長，我想你說的是 2% 的有機成長，而其他地區則是正成長。您是否仍然看到北美或任何其他地區去庫存的逆風，或者市場疲軟現在更多的是需求而不是去庫存的結果？

Yes. I think it's more the latter, Tami, that demand is a function of where we are in the economic cycle. And so destocking which was a headwind, all of last year is no longer a significant factor at this point. I think if you look at just North America, down 2% was really driven by Welding, down 6% in Auto, Polymers & Fluids down 4% and then some positive momentum in Food Equipment up 2% and Specialty up 5%. But again, that's really more a reflection of kind of where we're at in the cycle versus anything going on from a destocking standpoint.

是的。我認為更多的是後者，塔米，需求是我們所處經濟週期的函數。因此，去庫存是一個逆風，去年全年都不再是一個重要因素。我認為，如果你只看北美，下降 2% 確實是由焊接推動的，汽車下降 6%，聚合物和流體下降 4%，然後食品設備上升 2%，特種設備上升 5%，出現一些積極勢頭。但同樣，這實際上更多地反映了我們在周期中所處的位置，而不是從去庫存的角度來看正在發生的任何事情。

Got it. That's helpful. And then just a bit clarity on the new operating margin guide So operating margin expected up about 165 basis points on flattish organic growth. Can you help me understand that 165 basis points, how much of that is Enterprise initiatives versus the 140 you saw in the first half? And then is there any price cost or volume or anything else that's adding to that 165 basis points year-over-year?

知道了。這很有幫助。然後，對新的營業利潤率指南進行一些澄清，因此，由於有機成長持平，營業利潤率預計將上升約 165 個基點。您能否幫我理解 165 個基點，其中企業舉措佔多少，而您在上半年看到的 140 個基點？那麼是否有任何價格成本或數量或其他因素導致這 165 個基點同比增長？

Yes, I think and not a lot of volume leverage, obviously, as we're guiding to about flat growth for the year. The biggest driver continues to be the Enterprise initiatives. As you said, we got 140 basis points in the first half. The roll up for the second half looks really good, as we said today, more than 100 basis points. And so somewhere, I would say between 100 and 140 is maybe a reasonable estimate.

是的，我認為，顯然，銷售槓桿並不多，因為我們預計今年成長將持平。最大的推動力仍然是企業計劃。正如你所說，上半年我們獲得了 140 個基點。下半年的總結看起來非常好，正如我們今天所說的，超過 100 個基點。所以在某個地方，我想說 100 到 140 之間可能是合理的估計。

And then price cost, a modest contribution look kind of back to a normal price cost environment. And so that's not a significant driver. Really the big driver here, as I think you pointed out, are the the Enterprise initiatives that independent of volume continue to contribute in a meaningful way, which is a great position to be in in a given where we are in the cycle in a pretty challenging and uncertain environment. And without giving too much away as we kind of look into the future beyond this year, we'd expect another solid contribution in 2025 and beyond.

然後價格成本，適度的貢獻看起來有點回到正常的價格成本環境。所以這不是一個重要的驅動因素。正如我認為您指出的那樣，這裡真正的主要推動力是獨立於數量的企業計劃繼續以有意義的方式做出貢獻，這對於我們處於相當好的周期中的給定位置來說是一個很好的位置。在展望今年之後的未來時，我們不會放棄太多，但我們預計在 2025 年及以後將再次做出堅實的貢獻。

Understood. Thank you.

明白了。謝謝。

Sure.

當然。

Joe Ritchie, Goldman Sachs.

喬·里奇，高盛。

Hey, good morning, everybody.

嘿，大家早安。

Morning, gentlemen.

早安，先生們。

Can we get back to Specialty for a second? You guys talked about the strategic positioning efforts there. And when I think about that business, it's a hodgepodge of a bunch of different businesses that seemingly don't have a lot to do with each other. And so I'm just trying to understand like what's the kind of like overall strategy with the businesses within Specialty? And then what do you, what are you guys really doing to kind of drive this margin expansion sustainably higher over the long term?

我們可以回到專業領域嗎？你們談到了那裡的戰略定位工作。當我想到這項業務時，它是一堆不同業務的大雜燴，而這些業務似乎彼此沒有太多關係。所以我只是想了解專業領域內業務的整體策略是什麼樣的？那麼，你們實際上在做什麼來推動利潤率擴張長期持續走高？

Yes. So Joseph, Speciality is indeed, as you said a collection of high quality, high margin businesses. There is a concentration around consumer packaging, both on the equipment side, on the consumable side, there's also a bit of a concentration around appliance components and then as a collection of smaller businesses, one of which is primarily lined up alongside aerospace, that are very attractive and certainly capable of growth.

是的。所以約瑟夫，專業確實，正如你所說，是高品質、高利潤業務的集合。主要集中在消費包裝方面，無論是在設備方面還是在消耗品方面，也有一些集中在家電組件方面，然後是一系列較小的企業，其中一個主要與航空航天相關，即非常有吸引力，而且肯定有成長能力。

So we're going through a strategic repositioning of some of those businesses in terms of heavier leaning on PLS. We haven't seen much growth in Specialty over the last few years, as you know, that's what caused us to relook at the portfolio. But we feel very good about the progress we're making in terms of, there's a lot of highly differentiated product lines in that segment and this repositioning will put us in a position where we accentuate the growth of those, we resource those and we may be de-resource some other ones that are not in a position to grow. But overall, I would say it's a nice portfolio of businesses with a strong differentiation lineage running through it. And as you say, we are well positioned to go to a 4%-plus in the long term.

因此，我們正在對其中一些業務進行策略性重新定位，並更加依賴 PLS。如您所知，過去幾年我們在專業領域沒有看到太多成長，這就是導致我們重新審視投資組合的原因。但我們對我們正在取得的進展感到非常滿意，該細分市場有很多高度差異化的產品線，這種重新定位將使我們處於一個能夠強調這些產品線成長的位置，我們為這些產品線提供資源，我們可能會對其他一些無法成長的企業進行資源削減。但總的來說，我想說這是一個很好的業務組合，具有強大的差異化血統。正如您所說，從長遠來看，我們有能力實現 4% 以上的成長。

Okay. Great, Chris. And then maybe just a follow-up to that is, sometimes companies will go through this addition by subtraction exercise. And it sounds like you guys are in the process of improving the margins, the margins are already good. But it also kind of seems like there's an opportunity then for you guys to potentially divest some of those assets going forward, whether it's in the Specialty business or beyond and the rest of your portfolio, how are you guys thinking about that equation and divestiture side?

好的。太棒了，克里斯。然後也許只是後續行動，有時公司會進行這種加法減法練習。聽起來你們正在提高利潤率，利潤率已經不錯了。但似乎你們也有機會剝離未來的一些資產，無論是在專業業務還是其他領域，以及你們投資組合的其餘部分，你們如何考慮這個等式和剝離方面？

Yes. So we look at our portfolio on an ongoing basis. We believe we've got a very high-quality portfolio. And if the opportunity comes to divest, we would certainly do that. I would say that as we think about portfolio management today, it's more likely to be in the realm of product line pruning as opposed to divestitures, now that could change. But as we look at it today, it's much more along the lines of pruning within businesses as opposed to divestiture of businesses I would say.

是的。因此，我們持續關注我們的投資組合。我們相信我們擁有非常高品質的產品組合。如果有機會撤資，我們一定會這麼做。我想說，當我們今天考慮投資組合管理時，它更有可能屬於產品線修剪領域，而不是資產剝離，現在這種情況可能會改變。但正如我們今天所看到的，這更多的是企業內部的修剪，而不是我想說的業務剝離。

Okay, thank you.

好的，謝謝。

Julian Mitchell, Barclays.

朱利安米切爾，巴克萊銀行。

Hi, good morning. Maybe just a question around the free cash flow conversions because I think it's sort of 67% in the first half, the year has guided 100 plus. Doesn't seem like there should be a lot of working capital liquidation in the second half because the quarterly revenue run rate is kind of stable at $4 billion. So maybe just flesh out the confidence in the cash conversion step-up, please.

嗨，早安。也許只是關於自由現金流轉換的問題，因為我認為上半年約為 67%，今年指引值已超過 100%。下半年似乎不應該有大量的營運資金清算，因為季度營收運作率穩定在 40 億美元。因此，也許只是充實對現金轉換升級的信心。

Yes, sure, Julien. I mean, I think you're right. We are slightly below our typical conversion range here for the first half. And I think on the last call, we talked about our focus at the divisional level on reducing our inventory months on hand from we're right around 3.1 right now, as compared to pre COVID, 2.5 or even a little bit lower than that in some of our segments.

是的，當然，朱利安。我的意思是，我認為你是對的。上半年我們的轉換率略低於我們的典型轉換範圍。我認為在上次電話會議上，我們談到了部門層面的重點是減少現有庫存月數，目前的庫存月數約為3.1，與新冠疫情爆發前相比，為2.5，甚至比2019 年低一點。

So we've made some progress. Inventory is down double digit on a year-over-year basis. But I would agree with you that we can definitely do better. We fully expect to take advantage of this opportunity in the second half to reduce inventory levels and generate above average free cash flow while, as I said, maintaining our typical ITW CAGR customer service levels.

所以我們已經取得了一些進展。庫存年減兩位數。但我同意你的觀點，我們絕對可以做得更好。我們完全期望在下半年利用這一機會降低庫存水平並產生高於平均水平的自由現金流，同時正如我所說，保持我們典型的 ITW CAGR 客戶服務水平。

So big focus on this in the second half. And just given our track record around kind of do what we say execution. We feel like we're really well-positioned to generate above-average free cash flow in the second half.

下半場我們將重點關注這一點。就我們所說的執行情況而言，我們的記錄是這樣的。我們覺得我們確實處於有利位置，可以在下半年產生高於平均的自由現金流。

That's helpful. Thank you. And then just my second question would be around the sort of, it looks like the second half run rate on the total company sales and margins very similar to Q2 as you normally guide with sort of 26% margin, $4 billion revenue a quarter.

這很有幫助。謝謝。我的第二個問題是，下半年公司總銷售額和利潤率的運行率與第二季度非常相似，正如您通常指導的那樣，利潤率為 26%，每季收入 40 億美元。

You mentioned, Michael, the days sales effect in Q3, Q4, but just wondered anything else in terms of seasonality for total company you'd remind us of for the third versus the fourth quarter? And any big moving parts on the segment margin as we step into the back half? I think Specialty, you've talked about Polymer & fluid. I'm also curious about the margin outlook there, please?

邁克爾，您提到了第三季、第四季的銷售影響，但只是想知道您在第三季和第四季中提醒我們整個公司季節性的其他因素？當我們進入後半部時，細分市場的利潤率有什麼太大的變化嗎？我想專業，你談到了聚合物和流體。我也很好奇那裡的利潤前景，好嗎？

Yes. I think all good questions, Julian. I mean, Q3 looks a lot like Q2, I would say. We typically see a modest increase in revenues from Q3 to Q4 with emphasis on modest. And we also see typically a modest improvement in operating margins as we go through the year from Q2 to Q3 and then into Q4.

是的。我認為所有問題都很好，朱利安。我的意思是，我想說，Q3 看起來很像 Q2。我們通常會看到第三季到第四季的收入略有成長，重點是適度成長。我們也看到，從第二季到第三季度，再到第四季度，營業利潤率通常會略有改善。

And so there's really nothing unusual going on there. We do, as you pointed out, we do benefit from having a couple of extra days here in the second half and then like I said, more favorable comparisons. The other thing that would not be in the run rate is what Chris talked about earlier, which is this increased contribution from new products coming in at higher margins.

所以那裡確實沒有什麼不尋常的事情發生。正如您所指出的，我們確實受益於下半年在這裡多待幾天，然後像我說的那樣，進行更有利的比較。另一件不會出現在運行率中的事情是克里斯之前談到的，即新產品以更高的利潤率帶來的貢獻增加。

But we feel like we've really, maybe taken not just an approach that's consistent with kind of how we've done it historically in terms of guidance, but a fairly conservative approach going into the second half. Certainly things can change quickly. Things can improve, but they can also deteriorate and hopefully kind of parsing out for you the impact here in Q2, in terms of what a point of revenue growth sequentially means or decline means, you have the $50 million at the decremental that we talked about, I think, gives you a way to kind of further risk, adjust your numbers or if you are more optimistic, you can certainly make those adjustments as well. But that's kind of how we think about the guidance here for the second half.

但我們覺得我們實際上可能不僅採取了與我們歷史上在指導方面所做的方式一致的方法，而且在下半年採取了相當保守的方法。當然，事情可能會很快發生變化。情況可能會有所改善，但也可能會惡化，希望能夠為您分析出第二季度的影響，就收入連續增長點意味著什麼或下降意味著什麼而言，您將獲得我們討論的5000 萬美元的減額我認為，這給了你一種進一步冒險的方法，調整你的數字，或者如果你更樂觀，你當然也可以做出這些調整。但這就是我們對下半年指導的看法。

Great. Thank you.

偉大的。謝謝。

You're welcome.

不客氣。

Walt Liptak, Seaport Research.

沃爾特·利普塔克，海港研究中心。

Thanks, Chris and Mike. Wanted to ask a follow up on the guidance and just a comment that you made on the first question about that. It sounds like June might have gotten a little bit better for some of the capital goods businesses like Welding or maybe some others. I'm wondering if you can talk about that, that some of that macro industrial weakness starts to get better.

謝謝克里斯和麥克。我想詢問該指南的後續情況，以及您對第一個問題所做的評論。聽起來對於一些資本貨物業務（如焊接或其他一些業務）來說，六月可能會好一些。我想知道您是否可以談談一些宏觀工業疲軟開始好轉的問題。

Well, yes, I think what June was, things continued to moderate, particularly auto builds were softer in June. And then on the CapEx side, Welding, I think consistent with commentary you may have heard from some of our peers in the Welding space. And then Test & measurement, I think while we have not seen a pickup in semiconductor or electronics or CapEx, I would say semi also has not gotten worse. So it's kind of bumping along.

嗯，是的，我認為六月情況繼續放緩，特別是六月汽車製造更加疲軟。然後在資本支出方面，焊接，我認為與您可能從焊接領域的一些同行那裡聽到的評論一致。然後是測試和測量，我認為雖然我們沒有看到半導體或電子產品或資本支出的回升，但我想說一半也沒有變得更糟。所以這有點顛簸。

And I would just add that we remain like really well positioned for the inevitable recovery down the road. And I think if you look at some of the segments with positive organic growth here in Q2. So you look at Specialty, you look at Polymers & Fluids, the operating leverage that we generate are fairly modest. Organic growth is pretty remarkable.

我想補充一點，我們仍然處於非常有利的位置，可以迎接未來不可避免的復甦。我認為，如果你看看第二季出現積極有機成長的一些細分市場。因此，您看看特種產品，看看聚合物和流體，我們產生的營運槓桿相當適中。有機成長非常顯著。

So we are really well-positioned for that. We continue to invest a lot of focus on new products, but we've not seen a pickup in those markets yet. But again, really well positioned for the inevitable recovery down the road here whenever that may happen.

因此，我們確實處於有利位置。我們繼續在新產品上投入大量精力，但我們還沒有看到這些市場出現回升。但同樣，無論何時發生這種情況，我們都為未來不可避免的復甦做好了充分的準備。

Okay. Yes, totally agree with that. And one of those segments is doing that's growing food equipment. You guys sounded kind of upbeat about kind of the retail chain, despite some of the bankruptcies that have been going on. I wonder if you can talk about maybe a little bit more detail how that, that retail part of the business?

好的。是的，完全同意這一點。其中之一就是種植食品設備。儘管已經發生了一些破產事件，但你們聽起來對零售連鎖店還是持樂觀態度。我想知道您是否可以更詳細地談談零售業務的部分情況？

Yes. I mean, I think the retail growth similar to in the first quarter, I think 9% here in the second quarter, and it's all driven by new products. So this is all way and wrap equipment and new product rollouts. And I'd say our customer base is not part of the population that you may be alluding to that's having trouble financially. I mean, these are all the big grocery store retailers, chains that you would expect. And so we're not seeing any impact there from them being in trouble financially, quite the contrary.

是的。我的意思是，我認為零售成長與第一季相似，我認為第二季零售成長為 9%，這都是由新產品推動的。這就是設備和新產品推出的所有方式。我想說的是，我們的客戶群並不屬於您可能提到的遇到財務困難的人群。我的意思是，這些都是您所期望的大型雜貨店零售商、連鎖店。因此，我們沒有看到他們陷入財務困境而產生任何影響，恰恰相反。

Okay, great. Okay, congratulations for that. Thanks.

好的，太好了。好的，恭喜你。謝謝。

Alright, thank you.

好的，謝謝。

That concludes the question and answer session. Thank you for participating in today's conference call. All lines may disconnect at this time.

問答環節到此結束。感謝您參加今天的電話會議。此時所有線路可能會斷開。