GGG - Earnings call transcript Q1 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the first quarter conference call for Graco Inc.

If you wish to access the replay for this call you may do so by dialing 1-855-859-2056 within United States or Canada. The dial-in number for international callers is 404-537-3406. The conference ID number is 2464642. The replay will be available through 2:00 PM Eastern time Thursday May 5, 2022. available part PowerPoint of information is presentation, additional as available the has in slide a which Graco webcast player. of questions the request conference the the will we At open up for remarks and opening after answers from management. company the

in results be of report the various company's remarks expectations, prospects safe website risk differ the are Item a provisions purpose may future. in company's factors, of www.sec.gov. XA and XX-K on www.graco.com call the management Form constitute remarks at quarterly Private the including Item and annual by Reform of may reports the SEC's those this those about made Form XXXX Securities recent Act. from on During forward-looking of website indicated These for at the These identified most available result company's the and the various their plans XA of on statements report Actual Litigation materially XX-Q. for harbor as

Forward-looking Executive current views Controller no only will the to made. these they events. speak statements new or reflect time Information statements Schoenrock, Corporate future conference The undertakes update to turn information obligation Kathy I management's light of Vice are of company President, now the in and over and Systems.

Kathy Schoenrock

good for Mark overview our to quarterly of today Thank with turning I brief a call Mark discussion. morning, over here and everyone. I'm Lowe. results you, provide Sheahan and will David additional the before

within XX allow first adjusting were The translation information are percentage were foam earnings net provided from of earnings million, and product from under you million historical by structure were million segment. call high-performance $XX tax benefits end the quarter points effect users and year. results the we quarter, quarter all find per historically the net have of on decreased this Reported for in for our last the of our of to impact to been sales currency will Prior focused approximately first managed and exercises, rates contractor $X.XX business included excess the of share. quarter helpful. our an or After change businesses. conference Graco quarter. products, option two diluted or website the provide basis $X stock $XXX of additional Our quarter first restated have The reported the gross and per address year the or may share. The and from now translation of markets, to $XXX current the but is the was of basis currency year costs from $X.XX rates. year last million rate higher sales points information than down realigned increase for that input margin distributors primarily fourth been organizational quarter our website. decline impacts The slides from has changes reported diluted on quarter-over-quarter. XXX of was Yesterday and segment in leadership points adverse quarter higher last segment the restated posted in overlap conform coatings Contractor and Industrial offerings, Beginning by first X%

Our remaining move XXXX sell-through we and on actions half. through as a second the the the quarter and pricing rate price our we actions improvement our modest input increases a in are will and basis full impact margin offset XXXX pricing gross costs we result expect current volumes, pressures expect the and these dollar that cost in to backlog. of taking second realize At hold XXXX

unallocated the $X which amount Belarus. Russia in of charge and Of commodities in million course will in remain and This volatile for expense. full million costs is many quarter, includes increased monitored. be closely Total expenses our $X of included exposure operating a receivables the corporate

and Russia in suspended Belarus. We sales have currently our

of of annual and This any $XX do adjusted increase tax country, employees. quarter. the XXXX a sales. totaled do from million in decrease million relates the to approximately is to operations our year. rate for demand to quarter by a mostly Belarus by last to million we prepayment increase quarter, was of private have driven meet million XX% year, placement the X.X% levels. $X.X with which fee expense inventory from $X Cash the The not debt. purchases a million in consolidated incentive While Russia flows associated comparable last were physical payments and first an $XX of have Sales total we handful Interest in the increased in operations effective of of $XX

repurchased we million, our million for dilution quarter, in will first the offset XXXX. shares which $XXX During X.X largely

prepaid earlier, placement million debt. mentioned private our we I As $XX of

also We of dividend expenditures $XX capital million payments of had million. $XX made and

the year segment call further for tax found Finally, be discussion. over now the can and for Mark our currency full estimates turn in I'll unallocated to and corporate XX. call impacts expenditures expense capital slide deck Page rate regional on conference

Mark Sheahan

Kathy. And everyone. good you, Thank morning,

our a such times All of a segments Incoming sales availability paint order components sprayers. driven motors with an but for Industrial and quarterly remains and due end and year in deliver. positive EMEA in in and broad-based resulted sales from primarily regions. experienced key to limited morning increase as our in growth in the to on outpaces electronics, In castings, product elevated will component and materials engines Asia Pacific Long large my ability remained XX% be last the quarter by backlog record volume shortages year. lead constant of started reportable basis. America all currency this the strong Contractor, saw Process North We in decline comments The all organic segments.

end was million first at higher the $XXX is Our what was which consolidated year. of $XX of at quarter, backlog the approximately the million than last it end

increase. have We our annual implemented price

for year's the backlog, backlog inflation last due that on dollar cost a has see of full expected did believe year's At impact the current now at Therefore, basis. should we quarter. of year. A the as realize offset is been not we of a to from we year-end enough shipped. be will pricing size However, costs, the pricing, on last actions greater our which majority remainder its impact our pressures pricing profitability to from during

Now turning our the which America commentary very up first segments. segment last for the sprayers, After North EMEA quarter. component single our customers. was strong on year, in were digits our impacted low to Contractor shortages and large a quarter paint by some primarily serves We heavily

units earnings inability negatively larger ship more to the profitable operating during Our quarter. impacted these

over incoming XX% last all product to million, which in lines backlog in have Our since up rates continued a order end of of year. $XXX is grow resulting the

recently, remain busy. starts units million are increased year. have rates to be still Housing this projected interest contractors mortgage While X.X

sealant growth. as Industrial remained geographies equipment. operating fifth segment in New increase up for adhesive improved quarter quarter achieved and of Sales construction many year. is existing first The digits remodeling forecasted should And mix and incremental along such forecasted that liquid in home the major the to solid mid-teens in positively of to in for sales believe double-digit We segment quarter, Contractor be its the our digits. the in pricing grew with demand during impact is double XX%. categories and The posted and margins profitability impressive strong and XXXX actions earnings year. all product powder consecutive remain records coating with implemented strong. Commercial of finishing, resulting largely product mid-single sales remainder

XX% have components. year constraints, grew in time for business component products. increase million is The an saw We segment that and both for the $XX earnings. last we're year. Process key worldwide were to end quarter in and pace Incremental demand by persist and revenue are pressures backlog logistical strength compared elevated same still optimistic to $XX process million cost of facing the and operating pumps negatively resulting which last on for equipment, lubrication continued records throughout compared We impacted contributed XXXX. to in of of and the will margins Backlog semiconductor the

to our remains Underlying on in end healthy. and Moving demand markets geographies our key outlook.

on the the keeping geopolitical impact and balance may we how conditions However, close are eye of economic year. a

growth are currency of in basis with we organic every revenue now our For constant on confirming reportable single-digits high guidance XXXX segment. expected an

While operational fully intend persist, our execute we core strategies. challenges to against

product are development investing in new We initiatives.

make distribution to facilities continue We our channel. investments and in

It's our work opportunities times. acquisitions. that teams challenging help a fantastic everyone of our on new organic finding ready attractive see combination stepping activities remarks. both questions. prepared initiatives in a on focused in growth I'm focus proud through in including the concludes up of are to to We we're niche external markets That for some and doing profitable hard are Graco fashion. Michelle, classic

Operator

Thank begin will you. at question-and-answer The this session time.

in taken is be order our will for the question. question first standby Please received. it Your

question. Markets. the Our of line first RBC state question Deane from Please your Capital Dray comes with

Deane Dray

morning, Good you. everyone. Thank

Mark Sheahan

Good morning, Deane.

Deane Dray

on look a and You cadence monthly specifics April. those in case you sales provide forward have Do of here? a this organic guys usually

Mark Sheahan

It's last can I'll Deane. sometimes disclose in. were at of monthly we quarter be like didn't at time. We the that Backlogs here still are tell we you a in year where far coming orders least look that the And and are a up. quarter first so are misleading. ahead this bit that this at –

David Lowe

changes XXXX the we we is add we doing would And I in continue it uncertain more in bit thought chart And guidance. thought think during demand. because it about business I relevant years ago two was visibility in XXXX, What a we gave extremely to stopped when it that of sharp introduced times. that

Deane Dray

quality-of-earnings clarify really as that appreciate. case still But did in the but include just exposure. a your one-timer. your the was very to color Got And I on said you clarify it it. would the And on a of just that's that stage visibility using you we're in receivables. the we of are write-down, operating which to context. Most standpoint I and Russia make a uncertain results from appreciate of all that that peers Russia

Mark Sheahan

Yes that it. is

Deane Dray

just this I could – cycle you for much short then not for the you. you lastly And it's ship us Okay. know can calibrate how what's quarter?

either a so not but can us to building You're you and big backlog pieces component calibrate past ship for was due not of forth? able because typically

David Lowe

take want and with David myself. that a shot is puzzling someone to one I've may elaborate. Lowe. at this it been then Well, I'll else

first is – Or thinking how the QX maybe at Deane. respect is last of was because And CED it's the it, year. with of the pretty that look is if loaded. supply it's I last quarter of "normal to – volatile. Is pretty front-end Here seasonality am chain you quarter"

the our ship. about was maybe first backlog So we've to seen certainly since XXXX, than to grew say ability would our quarter across normal $XX what of the more our respect I all million. in And of that with end that businesses

Mark challenges Maybe increase. talk that are it's I would case that quarter number the supply the as the million portion contributing $XX mentioned, certainly $XX of make some basically This is chain million. to I or the seems about orders to when precisely and that the $XX million. building orders but on of And we'll been range how never have up. know several factories in possibility where

Deane Dray

That's helpful.

through Just Graco And the for on to, is for the to put that we're in a January price increase. price across. and to is look, it bit realization read the last annually takes price one used this playbook

give like increase Any your some What this expectations here. price pushback? us any the And was year? from Just context. receptivity

Mark Sheahan

and getting It real implemented. see in. participate been Yes, and higher Graco. businesses like based to without fully I'll we what into are on in that it the has the did the speaking for because starting it expected. a increase does what would than We're line was the no we've normal vary price have back, be significantly and what specifics, had call geographies And there that of had been kind with but And realization. was that surprised by good received say I we generally actions some increases pricing customers one would we push really obviously

Deane Dray

That's all really Thank helpful. you.

Mark Sheahan

Thanks, Deane.

Operator

Mike next from of our line your comes state question. question And Baird. you. Halloran the Please Thank with

Mike Halloran

everyone. morning, Good Hey.

first the outlook from or patterns here. in products the could Obviously you, where Anything you eye challenges seeing there geopolitical but you're macro So, you some anything for that just keeping of the shortages point seeing you're perspective geographies, or high any cracks the in now out that in or component in highlighted mentioned impact you're out you, right concerns an cetera? are these the the that any level et than larger other there on -- Contractor, with in is lines, of the specifically? product you'd the order particularly that

Mark Sheahan

kind not an numbers more that really going seen, self-inflicted over CED our the results our the being just lot the a that in that said. on and able whole probably component definitely slowdown on control I right had. what any of in there. we we and what's of can't And keeping think Industrial the war due on whether shortages in we we're and haven't part I happening what Europe things we've to we like businesses. a just products really our QX that in was mean saw there really eye to on Obviously, get

close quickly. area And one is usually will that's lockdowns the does that and two there it probably an the what to country. pretty comes disappear in this that's out happening So, are back China. But I we're eye that They've happens one the some second got eye is something things on. at disappear when throughout keeping would different point. hopefully And that a worth it COVID that are point on, keeping those you at point cities

David Lowe

there's of do, the add of us. we're seen so rates with can that course. foreign intermediate that's so -- that. been I up And year. not modest the far bit long And -- headwind tracking Mark. beginning while exchange, a since on I tracking but We've agree we would move would of we're rates, the much a interest over issue for

Mike Halloran

But hit your though, a patterns of are like on an any -- lot know purchasing you no order keeping eye of so things seeing those or are we're I okay, things that right? book currently? customer

David Lowe

No, not yet.

Mike Halloran

sense. That makes Okay. All right.

larger So, you that? M&A thinking the the Maybe just backdrop? deployment and funnel maybe an side, of some about know you're willingness think about side just on I capital to the how things. you're the also have then, given buybacks how then internally about elevated on on But thoughts, update thinking scale a guys

Mark Sheahan

buyback an talk semiconductor a we we'd to high-purity about put little quarter activity our needle, but like that particular on I'll sure, we'll divisions. He question out And do probably I going so was business share recently looking deal complementary hired least here to we've and was things a we're on like our leader related some did It's in I we're for in have David company horizon. hoping bit a the let radar but organization. and for of a so as to and would corporate about guess next to that At business. early little It over let that of it's M&A. the David nice not We for traction handle move we and spray have I'll started mean more teams Yes. And make development happens. for and valves we're M&A the it things during talk that, growth the see small some that another external the about you our say that or And at small, segment. cylinders a to fluid-handling the I buybacks. I'll They here it's more our guns planning what fairly saw. growth that. like we're creating nice days and five sort so see talk so like more do years starting group. within pipelines M&A see

David Lowe

company, talking dry acquisition think, of Mark activity that. I good have for that about, we the the in that is for the terms capacity financial So, powder

be I we shy pricing, cash the approach. of think that think uses first are in We always evaluate share think based we powder taking dry steps includes closely, our the is to approximately that, we that event we steps also so in And And buybacks. to the is or following opportunities value we took manage share current the that creep with won't have the for the components and to year. I about that going something We exposure the our consistent And in what to other we avoided. believe are price creep be as stock think, quarter movements stock certainly long-term do. on be be will there of

there opportunity in think a on discount of trade And do I a stock ROI look when attractive. when over bit have you if last very know, purchases companies are industrial presents. we As returns and decade, And the at back that we and be to times ready, track our when basis. been want an markets we the

Mike Halloran

appreciate Really lot. it. a Thanks

Operator

next D.A. Thank question And from Summerville you. our the of with Davidson. line Matt comes

Please, Your line open. ahead. go is

Matt Summerville

be able operating wondering bit you're Thanks. might saw headwind inflation I you maybe if out challenges would how the to some in mix the earnings guys helpful was QX, a been to of was much throughout, of somehow if little you Mark. -- parse driven unabsorbed by it versus referencing you've

Mark Sheahan

so, really we're now pricing wants looking came that the her right if a think And our Kathy let in, actions I'll at costs the in do price first at comments, opening in, I I'll high quarter. said our cost covering Yes, like start. chime level, with we the but and in to

So the really mix pretty substantially, is it business, in of Contractor that products in the majority particular, they the the come really the driven when you was rate where look -- you quarter. the sold which margin down at of that was saw by decline

being that's highlight So sprayers Kathy. add those don't equalize. we these as higher-end year, for I to the kind as have else why a through of reason hopefully, way tried our to anything work And trends if it. know we main of you sort

Kathy Schoenrock

right. Yes, that's I think,

have the The are our that operating well. negatively other that currency there earnings thing impacts as is affecting in we

Mark Sheahan

good It's point. Yes. a

Matt Summerville

QX, there. the a for mean, follow-up margin headwinds, I margin watermark availability. those given with FX is was to about be a that we Has performance that Thank respect cost how you. Contractor, cadence, that should sprayers? headwind? go-forward to Industrial, high then, despite flip the set large then, in thinking you to as gotten So component despite And strong better over pretty

Mark Sheahan

Yes.

that Anybody still too, talking which about, challenging and the challenges. electronic really mostly we're that, chips components, follows the for us. think the still is getting we're is the then motors I So that what knows facing industry

really working confidence everything that ability get seen doing And are shift, haven't to can, components would but in a of say, terms we have I hard. teams our that our high meaningful we here. So we're I in

but and real put as top I continue those side, earnings the rate We here. out, higher the as they like line on suffer see points as are on yes, we'd on much then, the had the possible. board to Industrial here reason it don't leverage. the that shipping be line really I why, bottom a to really products they've growth any to can good in quarter at tremendous from And should do able long And mean,

Matt Summerville

Thank guys. it. you, Got

Mark Sheahan

Matt. Thanks,

Operator

And question line Capital from Thank KeyBanc next Hammond our the you. Jeff Market. comes of with

go Your line Please, open. is ahead.

Jeff Hammond

Hey. Good morning, everyone.

Mark Sheahan

Hi, Jeff.

Kathy Schoenrock

morning. Good

Jeff Hammond

Hey, just short that large supply, that's you'll be start that sight Contractor your up delaying catch sprayers. get shipments of on on are to these kind seeing of Are components the you what's kind able worse, or there? particularly to that line of

Mark Sheahan

gotten gotten better but hasn't hasn't it really It either. worse,

I we're it's in So as sort were QX. right think, It's what kind seeing of same experiencing we here of the what today.

Jeff Hammond

just inflation. of then, this on all a seeing or captures increase increase wondering, confidence that see And I'm do we And re-acceleration kind inflation. more again? and another war change of post start we're Okay. price put price just I wait the or if And kind your Jan a of and through what lot price. that you is guess your one of tact you do kind

Mark Sheahan

don't with to for that. here XXXX pricing now our three, year. playing now. really that to anything, us the good six into the stick happen shape. us enough think did right never we're do to pricing. away current going throughout see long we're what's actions in have from we say, going out plan. help We in meaningfully hopefully months but visibility right from moving And I game I to beyond say never, now, I like on I like I'd And don't are about great early our Yeah, now

David Lowe

think Yeah. that we time I've at all when our And XXXX And everything seen. chunk of we big quarter when I backlog, segments. impact realization impressive. I would in that's with business, been We've particularly working the same that, Mark December were first it with seen in the on. the actual elaborated of the add agree would I a at we've impressed the you that our look through pricing on consider

of very feeling is pricing I'm over how the the at balance So, to moment year. results to good about, the going contribute

Jeff Hammond

one, And last great. then on Okay just Contractor.

in -- -- you If still look we than because order Contractor but look volumes understand issue. probably unit price kind I are more probably unit supply the at you volumes in negative if demand rates, you if were a of of But volumes? growth orders seems ex-out were, a seeing

Mark Sheahan

quarter. a we the increase still so mean, major I any market of were for saw change a the good pretty painters things talk in seen really backlog haven't It's general. you orders in kind we there. Yeah. in big of the that about the solid good business for some And

Jeff Hammond

Thanks Okay. so much.

Mark Sheahan

Yeah.

Operator

comes next the our Thank line with [Operator you. Buscaglia question of Berenberg. Instructions] And from Andrew

Please Your go open. line is ahead.

Andrew Buscaglia

guys. of more as zero now. in say? would the bit in environment that sales benefit Is was type business? that I number little can units can a because how about inventory think and of for strong of very Industrial guys this dynamics the about I just day. table there's hoping a to -- in a that relates have your a and you on cycle. this that And you pricing industrial credibility legs a this every give managing dynamics, to to specifically a lends fair be year how color would on of Industrial average quite talk bit that impacts like Hi in so present just one it And big XX% little been you like sold while to that's terms that

Mark Sheahan

in I indicated And breadth SKUs feel space. actually given sell think you Yeah. have to took our that pricing our the products ability of play Industrial of as complexities good which we and also they're mean, in the manage being about the that are incremental sales actions up and I realized out showing the in to pretty how I margins. actually we

very this solid So, I year, think so footing. they're on far

Andrew Buscaglia

Process playing the of to as like for type say same And segment out. dynamics is it fair well,

Mark Sheahan

or product more industrial now. the right also of distribution, Yes. it's but same, complex pretty kind about sell less feel lines, end-markets, something that through we good It's

David Lowe

The Yeah. I needs to industrial products just market a -- mean, I is There and process unlimited. arenas are that he manufacturing mean, not yes. into now. of going the them I And channel. not competent channel, it's go think typically that is mission-critical them end-user but say pricing the while -- And power equipment. the needs stocking pieces I that was and when a is generally capable very typically

of it -- proposition that So, part see yes do haul, customer the company's on to the that, And overall the value service you and is think as we our a justified deliveries. -- products. and of over many we strive premium with job perhaps long has the good

Andrew Buscaglia

Yeah.

see do Industrial, the is – there, XX% think as long you an XX.X% incremental are So that's of for that, sustainable when as margin operating over the eye-catching volumes you margin that kind somewhat right?

Mark Sheahan

Yeah.

So volumes are there.

feel we really point. back taking at step think a see this good profitability don't I about I that.

shape. good really in they're think, I

Andrew Buscaglia

Yeah.

Thanks, Okay. guys.

Mark Sheahan

Yes.

Operator

the our you. of from question next Morgan comes Stanley. And Thomas Thank line with Johnson

ahead. go Please open. is line Your

Thomas Johnson

Hi. Thanks.

honing you year-over-year the year? initially of had from exiting flat basis? had that Contractor that kind issues to if least of chain at quarter anticipated to there assume then a been those of – sales Just is shortages in kind color should I about kind of supply how think firstly, in remedied have worse adding on than demand been EMEA in deferred And last terms that were of fourth just kind business it those component the component the that shortages would safe of guess, supply on that we region. and if just

Mark Sheahan

can team can lot but our hard of got large And Yeah, million. the in it's know we've much component out Contractor. more as they these the product have to shortages. as would product while to backlog doing they door, get door have day, we over out for sure a everything chasing shipped what It's single $XXX happened, exactly is there a would because lot every

even think And different quarter, industrial going probably an year terms end into mean, whether that when components of really. big that, a of faced that America lot end have pretty the today challenge. is be of It's with would I this In various not say last of I most I at the things the prevalent year much we of gotten these knew from challenges. were started, situation. we ongoing could across a the getting fourth

everything some I the are know – we our in at doing can cases to doing And here redesigning what we know products. we're of And actually got So I we're We've source. Graco. looking hard some what is, on the to to working products and more engineering door, on is everyone manufacture teams issues. that at the alternative hands out confident ways all very get doing so we're deck products those

Thomas Johnson

shortages Great. And of for then component to base for that that outlook? ease last in one on you just start the your year of the of outlook assuming rest is those Are guys the or kind segment. case that kind remain as

Mark Sheahan

Yeah.

while, kind of to start we see little for hopefully think up of to loosen where we they think the a year, stay a but are end by they're I the bit. going things

Thomas Johnson

Okay. Thanks. me. That's for all

Mark Sheahan

right. All

Operator

conference no I Sheahan. further questions, will If you. the are Thank over there to turn Mark now

Mark Sheahan

forward to chatting for with All well you And participating call. very look time. next you today's thank in right, much

Operator

our today. disconnect. Have for parties for concludes participating. nice a Thank conference This may you day. now All

Graco (GGG) 29 Apr 222022 Q1 Earnings call transcript