ITW - Earnings call transcript Q4 2021 | Illinois Tool Works Inc.

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Operator

Good morning. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call. [Operator Instructions] Thank you. Karen Fletcher, Vice President of Investor Relations, you may begin your conference.

Karen Fletcher

Brent. you, Thank welcome and Fourth XXXX Quarter Good to Call. Conference morning, ITW’s CEO, are Michael and today me Scott Larsen. Chairman CFO, With and and Santi; President Senior Vice

to for During presentation full differ company’s Chairman and year cause quarter detail Slide actual reconciliation risks X my to now ITW’s more from financial results and today’s the measures the release. reminder our presentation XXXX This turn Slide and uses statements. XXXX. will to measures pleasure turn in subsequent those non-GAAP that We that a to most with year call CEO, you this results for XX-K a X, materially full and and contained over our comparable the forward-looking important Santi. reports XXXX to GAAP fourth press is expectations. guidance it’s provide is call, we measures, contains directly Scott Form SEC and about the to filed certain could discuss the refer of Please

Scott Santi

the our Karen the executing rising and XX% auto organic growth customers recovery $X.XX, delivering In or seven XXXX, quickly team combined of teams while of did free delivered another of flow million cash accelerate indecisively across profitable aggressively OEM to EPS level quarter to auto of as component At of XXX% term and the while input growth rapidly win supply growth in responding we and to and world of Throughout a QX XX% of portfolio. impacted our shortages delivered operational income. performance. X%, operating margin segments good everyone. result execution Thanks delivered around excellent limitations penetration segment our of strong to strategy XX.X% of an exceptional the and ITW market GAAP financial morning, net our $XXX entirety our enterprise cost organic and our continued Six productions by quarter. near the and be organic on due to was down job

enterprise year, in also of seemingly in our organic closed acquisition from results delivering by growth a for rise expanded XX% term with the a while importantly despite $X.XX, of very our test organic full XXX long path of the drive As dividends seven result And was basis the input points year. XX% billion contribution to an and meaningful of prior we ITW’s each from we Most segments we and growth to share constant of ranging execution form margin X% shareholders in our on XXX with raised through repurchases the XXXX, initiatives. generated to high dividend all EPS operating basis the increases, returned and quality of increase these another $X.X X%, stimulation delivered cost time XX.X% a our by enterprise and at we progress our to XX% record to potential versus business. continuing GAAP full an MTS strategy. on points

tier and around continue their decision in best have we and all people high in the class we a and dedication. and are our XXXX fund add exceptional and innovation for very the the term the pandemic performance remain provides decisions growth, quality our accelerate the made that of beyond. company that our may today want on margins company in and returns delivering as fully acquisitions has capacity in advantages, I deliver efforts you in top result that As of a and point the the is thanking necessary the to to performance enduring colleagues ITW another competitive investments invested in close to that sustain environment. bolt marketing proof Their to our people the early any by ITW continue The in and world retained is organic ITW fueling agility results we XXXX well-positioned recall, to to that strategy. throughout that long resilience

detail to Now XXXX over as I’ll full Michael, well turn who our guidance. the will call QX provide our on XXXX Michael? more as performance and year

Michael Larsen

to of Thank year-over-year day sequential MTS you, up Asia-Pacific X%. $X.XX third historical China MTS. X%. while MTS into was grew X% was X.X%. we momentum everyone. our currency XX.X% By QX added to Europe X.X% basis, grew international and EPS acquisition good into X%. organic plus Scott X.X%. margin in QX foreign XX.X% North morning was from $X.X organic our revenue sales X% of the acquisition by translation growth fourth impact per revenue accelerated X% on and with The of billion the up excluding as X% included Sequentially, revenue X.X% and up from of experienced Operating the continued as geography, declined costs. related that GAAP quarter with strong compared $X.XX quarter transaction growth headwind America to reduced and by The

As basis points, margin we same of in in headwinds the fourth the XXX as expected quarter. quarter, experienced cost the price third

the execution basis. and fourth continued operational the and dollar QX strong and volatile on board Overall year, financial the environment. positive and performance to pretty uncertain what we across dollar for and for excellent businesses Our respond rising to remains raw a quarter material were in appropriately decisively costs full in

results with Okay, for let’s X slide to starting OEM. segment automotive go

operating the down remained and pressures revenue Europe America top expected near the XX% down XX%, line, As with XX% down in mid X%. resilient teens. down solidly was and was China term North these margin organic on Despite

with equipment up challenges major North inevitable growth XX%. service continue up quarter and mostly around this and term, for these equipment par up and that with highest near the inside recovery the will of extended the up are X%. Food the of to the growth time over on for Institutional be as rate get in the at organic we XX% resolved. issues chain company XX% Europe confident persist driven ITW market led Asia-Pacific XX% the XX% contributor XX% America supply up growth industry organic While auto of XX%. was to period ultimately Both an way strong equipment growth restaurants and education particularly at with was strong up XX%. North by was XX%. service with America were grew International a

excited said up today growth the we’re of a great with at X Instron closed the strategic company XX% strong by consistently up our was slide electronics. capital to is acquisition electronics business demand about driven in and growing highly as Turning organic X% evidenced continued Scott We December, for margins with our XXXX we Instron XX% growth equipment and semiconductors for rate and which average. and and Organic test measurement X% well measurement above to and business. by it’s for test and X% XX% in fit to in as a it the MTS Instron operating acquired ITW on complementary organically business.

We’re to confident years next through reach levels over has MTS ITW similar of model. the performance of five the the business potential the that application to seven

slide channel. that continued growth grew XX% with With up in products business up X%. Onto Specialty was Equipment hygiene grew continued summary timely XX% to fluids was driven America Commercial up XX% class growth our by XX% and driven strong go the business demand MRO XX% growth broad Fluids when Construction X% down based XX% with in X. organic customer operating industry organic organic New tough rising of adjustments construction oil challenging consumables up XX%. is grew surged. in with up grew initiatives year price implemented up X% costs was up revenue Moving continued growth strength X. in to of and and XXXX. they rapidly North in and up renovation commercial slide last growth executed and with sustained at as International was Europe organic as in material were portfolio. Polymers America X% by teams applications. retail. grew industrial XX% strength for about X continue Industrial in grew XX% XX% environment the to XX%. the accelerate XX% Operationally, the of execute North was growth response aftermarket let’s of with raw to America X% XX% X% service and North revenue and with Zealand polymers gas. XX% was revenue delivered comp revenue on center which XX% residential the Welding was our the International strength Australia heavy X%. levels, XX%. to the and against world growth X% was world for recovery in margin a across and discipline with plus Automotive QX. around organic home slide a and win

auto typical with due grew obviously As XX% costs. based which at Incremental where of XX%, XX% margin broad to range organic below you to income billion a growth result, margin exclude due was XX% increased Operating growth XX%, our very XX% OEM shortages constrained two component revenue operating and customers. was was to XX.X%. $XX.X to if XX% is price our

income, XXX% GAAP tax long Excluding to to a working below capital XX% cash investments rate levels our the service revenue plus due components growth to and flow XX.X%. basis risk points company’s with have strategic inventory and net raw ROIC margin key cost, increase was XX%. support higher XX% impact for finished increased materials, was of made sustained than conversion goods decision flow of to supply by EPS to cash and customers. select we after that $X.X target free chain XXX incremental price the levels the key to and mitigate is our billion improved of Free term more XX% help on which

slide for to guidance. XXXX X Moving full year our

into and is with very strong deliver to of momentum and to XX% earnings So, to year growth. in performance XXXX organic good X% of financial XX% we’re another growth a strong the X% company position heading with

organic growth typical future For our established by guidance them process, levels seasonality. our adjusting of usual current into for the projecting and demand is

by to in organic XXXX segment at enterprise X% segment page, on of deliver next the with see to can you positioned level. every the X% As growth solid organic is growth

approximately dilutive MTS consistent neutral. basis forecast is to XXX total XX.X% $XXX of contribute partially $XXX year excluding expectation at today’s the margins foreign X.X% exchange level approximately basis Specific Operating points initiatives XXX XX.X% basis million of points. about by MTS, includes by full currency guidance growth revenue points expand said MTS XX.X% enterprise that at of headwind contribution before we’ve to revenue to by to are X% with EPS The projection million. finally, as X.X% offset and Our XX margin a enterprise what to includes to rates. from

incremental core headwind cost be our to to in points. about XX XX% margin price about MTS expected basis is expect excluding XX%, typical range. is We XX% of MTS including our margin Incremental and

expect year. the items We XXXX. EPS is onetime $X.XX is of compared expected up from for XX% GAAP XX% as to in tax The be range tax to last to XX% $X.XX XXXX XX% to XX% rate excluding in which to

free are to our XX% key and flow risk of sustain company’s rate support with service cash investments customers as supply net of mitigate We working with needed. forecasting a to to chain capital conversion solid the income further growth, XXX% levels

growth Our highly capital our framework. sustain to disciplined with our our allocation plans businesses. allocation one core profitable are XXXX remains efforts number internal organic Priority for consistent investments capital longstanding support and

dividend line model. a remains shareholder time critical with of ITW’s total attractive component an grows that earnings in return over Second,

profitable that MTS shareholders the growth can as capital. back returns on potential such our enhance our ITW’s front adjusted acquisitions risk quality potential, proprietary to term XX:XX have of improvement long from generate significant and methodology high acceptable application selective margin Third,

program, XXXX. we allocate Lastly, capital and repurchase $X.X shares billion own in we buyback to of to active surplus expect our share an

In $XXX XXXX, approximately addition, revenues for previously we annual million. and reinitiate have plans announced divestiture five divestiture businesses reactivated we will with our combined processes in of

basis over When While operating these and they out divestitures are rate organic XX aligned well, margins. completed of to XX of with quite performing points growth expectations the where coming operate months, next the we organic growth are XX are these ITW’s approximately ITW’s lift pandemic, goals. not markets expect to growth term in businesses long

Given we these them own for the with timing guidance uncertainties divestiture transactions, the associated full XXXX year. assumes

by projections Finally, last growth slide is organic Slide XX with the segment.

seven can of every to on run at see X% we’re level. based growth in the our X% expecting organic enterprise that with organic rates solid rates current You one of growth segments some

adjusted you. risk turn automotive production is to our X%. X% Karen, X% to forecast For a plus guidance single mid I’ll XX% back our penetration on OEM, digits typical of gains in automotive of of With it based the that to

Karen Fletcher

questions. the Thanks, open Brent, line Michael. up let’s for

Operator

from comes question first a Your line Instructions] of Citi [Operator with Andrew Group. Kaplowitz

open. Your line is

Andrew Kaplowitz

about run do. levels. I forecast reaccelerate So fluids Mike, growth versus you’re you seeing it at and could in the there how seeing know and then in talk that the your you where Maybe Are factor are customers quite up if like to And it all? seems segment XX as CapEx does polymers the you to you mentioned CapEx that looks strong. only actually But continue usually forecast rate business XX? predicting to businesses you’re you what like into be step QX

Michael Larsen

for Yes, I the really inside levels based seasonality. fluids segments, adjusted today is polymers typical which of other the same projected for the the into is XXXX segment think on established way rate and as of growth and current is XXXX demand

fluids. you where that that’s get range X% and So to polymers X% for to

about we’re in strong say, acceleration based these capital per possible demand QX day it’s our from seeing, levels. on continue XXXX. equipment that suggest strong talked normally we that run into continue We’ve QX Again, we’re any expect we in question not an We to of very slowing of trends demand when demand we up one but segments. see is CapEx only It’s X% continue our XXXX. based with in and expect businesses. the to assuming seen the will on rates X%, that revenue to really On nothing we’re an definitely demand I’d at that current QX in fully down acceleration into

Andrew Kaplowitz

margins with you But think which have in as in begun to know, Appreciate delivered expectations. QX I you line that. And in prices teens was down. come steel then mid auto

give last auto think quarter you talk color I able some in you us contracts. maybe margin can how think to about he OEM more about So in and XX your and to re-price when being auto ability, talked about

had you doing any have that? in So success

Michael Larsen

significant mid XX% XX% on production Obviously, high auto we’re think QX resilient, going auto to been in back, comes positive that not auto in the QX auto still really that we those remains a leverage expect so headwind we’ve the to volume and side Well, considering down continue and in teen headwinds business. on we’re level. in resin more I the is and business they’ve remarkably will that margins, cost XXXX the Price been in business. much and steel get to it’s as in

nature I in given a renew to just talked longer we’ve these continuing depends in structurally And longer exactly XXs. to term about pretty in when go back point. headwinds as our little of content and we vehicles think the before takes happens we industry. the that we’re getting As partner is with to are ahead that bit really space, contracts back margins new historically at which comes priced customers and to the auto this this When when low will at do on get cost the that volume mid of price that significant levels contractual so we and add are

Andrew Kaplowitz

it, Appreciate Michael.

Operator

comes DeBlase Deutsche Nicole question Bank. from next Your with the of line

is line Your open.

Nicole DeBlase

cadence the a a kind little bit a normal the specific could don’t totally I again? guidance. revenue about because talk thinking and you seems guys cost like quarterly appreciate strange look if price historically could that we how But about it just just of impact, do maybe of start versus could of EPS you quarterly Maybe XXXX with margins. seasonality, bit be year things

Michael Larsen

think it’s year. I another right, you’re be Yes, likely strange to

XX% That’s and half of half If the that one you versus will be year, that. first typically historically, half. generate our for the in terms the second second it do Yes we EPS XX% XX% good. to are way look we first in at half the XX% full and in

year rates, price how we historically, like XX:XX. think and this out, So think might we’re we XX XX, on run current cost we’re based more play and a

shortages one So it’s space. significant a QX thing out automotive in plans chip at no specifically, call backend The is, close. just are loaded you were more if But year, the little last the look there I’ll than typical. QX in

much So in QX, of but in still a up as to quarter Not auto QX. quarter in be last We the here in down that expect automotive. business the year auto first XXXX. as still was down X%

backend And about. talked this what’s more so that really plan loaded that’s driving I

with to inflation. I catch cost also seen It’s past we’re suggest a are our time continuing are bit good going pressures job we’ve in think adjustments I appropriate the to have to unprecedented we’ve better little just slowing anything learned lag price teams historically we up inflationary those add going here on down. to has responding work that just doing smaller that material raw take doing a cost and job. price a as as this really of add, I are things deal some are even we though we not that the with become might timely to really and seen

Nicole DeBlase

clear. Got price expectation fourth cost that of the price follow it, and the XXXX exit then quick in you just the a headwind that’s a Is And similar quarter we experienced to very enter up on what you a with kind cost tailwind? with situation.

Michael Larsen

So to the you, will cost in increases further are uncertain price it’s a here. increases react read, raw those further to with material that slightly up dilutive where the of margin we basis positive as with neutral all think was points for be and I is I QX. or to if But to better And we pressure are on year. is I going expectation to going that with cost that and be ended put goal further past material the be margins. our price honest EPS we think raw will really said mean, XXXX, practice, costs there environment the XX we’re consistent and

for our basis difficult here of it’s guidance is really points year. our in model end XX In to headwind. will So predict up the what

Scott Santi

and But about put net increases. then price include all XX Subsequent think dilution say we on that as occur points the that existing of emphasis go It’s that bit of I that through margin certainly point. the affect know we basis increases known a up good year. to today don’t just your level

Michael Larsen

is on you based costs it’ll that strange assumption increases. are there’s again a what our year, yes, from better that as think, in too. future And This getting year based So incurred corresponding and I price seeing and things XXXX, no a today, or worse. known on dynamic said, perspective here be we’re in pretty businesses

Nicole DeBlase

on. it pass I’ll you. Thank

Operator

Jeff question next of from Your Partners. line the comes Research with Sprague Vertical

open. Your line is

Jeffrey Sprague

deliver I going on more little and just customer I the do had to issues chain that wonder what’s gone that you of of part at bit of and on customers, impact of into QX, color think sort could nature you in provide questions, to on the continuing the some to early particular in despite able a back in ability being situation QX if your but also QX level deliver. own Was supply this Scott, to just an year? the see

Scott Santi

way think impacted that are The respond today. in better known I impacted supply those terms is, I demand, demand to would issues customer customer of chain

QX the So that set sort was say it emerging the shipment, known was that been has adjusted of the situation, order volatile. all issues sort would our around of customers. a in it more I that of timing of

are I in any hard say the improving plan us of because incremental a dramatic think So overall was to the supply are so still point, would I place. standpoint that evidence rates basically it’s chain issues a we’re our in our is surprise, It’s fashion there it plan, run less any in that of of not that all impact from things over the all by of thing constraints. just our seeing it in QX in it’s embedded had say

We internally reacting those to well. are very

delta automotive the ours still it’s every had all might want sort terms everything applying challenged the that of just that, that, on very and is if they I demand. still it the incremental positive couldn’t still seven rates, segments. that of of meaningful. be but underlying materials these issues every that access of is of customers representation it’d even visible are but customers to across right all sorts the component, to in all And bit of raw everybody most of growth now, of our are guess Our given the net-net of But

Jeffrey Sprague

Could was what your you context and realized price in XXXX? XXXX embedded provide in us what’s your for aggregate guidance on some

Scott Santi

between that’s So is we the for an XXXX. price kind of year what volume best at and And estimate this full provided estimate. really an is, of breakdown

full to price and think I the of we said range. roughly organic in year X% X%, X% that growth for

call that’s up. we are fully XXXX the be what in terms can talked ended the of at best. I’m versus here I and as not And where volume while said, really that’s last guidance helpful So I estimates appreciate about I question, these in because we sure for the price

our for And level give in the course, And confidence. price segments. enterprise really we that’s to includes so the very can that metric for we both of be is the enterprise opinion, a of for the guidance providing the with both most And the terms actuals we as in performance fully and growth, matters year and we transparent much try degree at organic organic as go granularity which as of growth high really you segments, report through volume. but

Jeffrey Sprague

one auto normal clear Great, content. pretty your for last maybe just and gave me. builds guide you I plus mean, one the is

Xam is to and heard noise was effect disconnect But bullwhip sort versus lot no the disconnects second the there’s maybe we or Is what and of like sounds half? and build from channel correct was some like your first between channel two. evened it everything supply at the that of vantage in in kind your between some there chain, real relative of So a out. point, there’s rates half

Scott Santi

to half if in clear, somewhere kind third have least industry, look X% builds fair that embedded here think maybe to call XXXX to we is suggesting year them party of guidance I but No are the at at hesitate I experts, it. basically of our leading a that. characterize forecasts to for just And range. you in be that’s XX% way What

base bills. the in digits are gains, plus point. points for X of to this essentially automotive penetration which we are mid X single They our in somewhere percentage are locked assumption at as So

that’s a fairly backend assumption. loaded. conservative It little so a And hopefully is also

like we as go and will we resolved think we the to and down through like QX and in overall become said bottlenecks once issues contributor a rate to improvement then expect So get organic I these I really gradual supply auto from at was automotive there growth said, the get of hopefully year be resolved. the least meaningful company those chain

Operator

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

Your open. is line

Scott Davis

that? I think a lot don’t of the good were second. commentary, questions have you your been zoned when for asked I kind but I can Yes talking what of you tell out us again, on. in divestitures was a know going about can then, kind of and and of are the that you size curious, offset the us have periodicity your there there out in some could sights of that? just kind that MTS timing of acquisitions But you I’m type remind And

Scott Santi

to the real just kind So of quick. divestitures summarize on

here, process as the divestiture begun five million the reinitiate, completed. business these. of know, take of we’ve a there’s kind units fair bit and the XX $XXX We’ve annual of course, to combined of uncertainty timing plans. expect the between could And to anywhere previously announced for months with these of you XX around about get we process So revenues

is impacts but XX kind sale also And the growth of improvement basis gains the benefit and points XXXX. on improvement structural overall we for embedded overall the points organic the operating that businesses the approximately sale in today The on we’re is of positive any of own of the thing, in margin rate we’ve onetime so, kind gains And company, of company. of really the basis in is company, the XX one that our onetime might flow obviously, included all guidance these through. not that

kind asset Instron you in MTS seen that we’ve type So subtraction high these addition know And the of business could we added deliver were can we’ve really business the we of with application that the by essentially, and if replacing with our a the with divestitures. that performance through a the divestitures to, quality that’s business model. of you effect wanted say

to might, around remain come I characteristics there’s on terms the the around deals, disciplined, that, same the In leaning might some come opportunities of of certainly little to timing times of the of uncertainty bit that when going things there’s that along talked I those extent and opportunistic divestitures. also we’ve mean, and in pipeline a other we and that we’re think have when about just fruition many like these that to these that’s some be always uncertainty but

Scott Davis

Okay, you it thank I’ll that. on. for pass

Operator

next line from the question Crédit with Suisse. Your comes Jamie Cook of

line Your open. is

Unidentified Analyst

Hi, all? you. gains been We the quantify and in are? Jamie. you if option on color terms were this at for hedged give price on if market us Thank is [Indiscernible] way could about any of there’s you And for then share could they’ve any wondering how XH talking and sustainable they cost, versus XH if you’re

Scott Santi

mean, their stay I maintain were of that think gains, of at is growth goal share take the in efforts this. able think service about these the products, in when I market time not to accelerating people, and mean, gaining organic lot significant me talked shot many the at invested I same the on expansion we’ve at to in the a level at I in able new let when their a initiatives core competitors their our So capacity cases a recovery as not market levels shares ITW. plans,

points challenges of best quantify. And across that last externally, are it’s gaining at year that stabilized, things to cost difficult lot answer confident are highly neutral evidence confident first share. think X% half. estimate growth it stay many, an organic we’re organic this. margin be not divisions, headwind the company way to our rates up are half revenue the environment. but the there’s they But XX inside a lots bit a so a progress first share. around XX% and pretty that organic market little I’ll that growth your are from versus price On for the reporting good we’ll our in we talked hearing half market to X% If about our maybe of mean, on be not somewhere on one where growth we able what ended we’re we the it’ll cost, gaining we And And to hedge. It’s will point to dilution the half to do a then price maybe and a point second we auto in I impact. of on I evidence anecdotal remains market when more just uncertain with in organic and full talk just growth basis and get year, second It’s the many question, our your we think year about the be above company, we’re rates are. of maybe efforts. I making this we

that that’s with So companies. our reasons what of we other much at the maybe today think costs that’s are on costs. you’re the why through than little hedging seeing And today’s these are But quick costs host question. better a dealing a essentially way time answer different bit P&L flowing there’s of your whole a real

Operator

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

Your line open. is

Tami Zakaria

Thank taking morning. you Good everyone. questions. Hello, my for

quarter the think quarter. is we the question How we the acquisition? your and that of the look impact margin the related And absorption first first notable MTS much is in inventories increase its and should rest into as year? fourth to So is how saw my a about on cost

Scott Santi

chain year, any million like is which, for closed something about that supply the else mitigate and risk the mind. points. a to year transaction. had over I $XXX supply said, here strategic in or really XXX, a little month I margins secure from increase that we inventory XX this customers came our know was So your decision think, MTS as from basis MTS exactly impact I on question in don’t you And was the this if specific of The in around December

Tami Zakaria

actually. think I question on do helpful. follow have I that up that’s another MTS

be So margin expect when do accretive? MTS you to

Scott Santi

say Well, I a not would rush. we’re in

is really powerful thoughtful the deliberate been be like in and of today. about might do. add, model the to implement we’re it never more going I We’re always we business business model terms just we excited MTS because than very how

can so what we’re about excited And do. it

margins to I seven seeing we to think what in about what business. line take growth are that was rates with to the in get caliber, instrument organic years we’re said it’ll and ITW five

Operator

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

is line open. Your

Unidentified Analyst

Julian. [Indiscernible] Good is morning. for This on

implies like question incremental. around, guide seems XX So around the first XX% it

and talked other Is guys some anything kind the lot costs throughout You there margin test out us? in cost the XX, and a half to you expansion impact to segments call auto. regarding could price MTS help of have impact in first measurement the else and

Scott Santi

if actually kind process I including XX% think say XX% for bottoms XX% just planning you in at that line I’ll from MTS, think our incrementals that XXXX Well, historical of in up the range. going with you impact that adjust segment, across unusual of incrementals for of terms on is really are the with And look there’s I margins as nothing the do consistent we kind ITW. to

XXXX XXXX despite they all than levels and segments have told those at all the markets. did do better that a best are in in in competitors they bit the expect relative the operating markets to class fact little Our they in us that to

nothing great really on what growth, Like margins. said on see are, what strong do. on nothing which they’ve we in seven expect. overall that’s enterprise pretty continued I typically unusual. We XXX expect you basis is strategic I XX, page margin can operating as to organic So sourcing also slide contribution the told broad segments, based in XX us think on The points initiatives see and XX:XX unusual, page certainly it’s based so from and progress across deck another all improvement, of we

Unidentified Analyst

And repurchases terms you. can we we months, more you M&A just and this guiding of just year. portfolio follow the when for versus over kind deployment buyback year given think XX guide the priorities, you X.X billion probably prioritize of about in helpful. of months? talk about and kind definitely how for thank the next share capital next XX then more active That’s Great, maybe Should assume, one up just in really on though,

Scott Santi

Well, we’re are both. we a I think position fortunate to really in that do

type I MTS to surplus not unusual our I went happen the more for there’s mean, through that us And And available. are four plenty for would extent allocation they X.X really of It’s these not program. the room priorities, have of exclusive. capital. become acquisitions so are complete they something mutually the billion, to that to really

Operator

Joe Fargo. the from question O’Dea Wells with next line of Your is

Your line is open.

Joe O’Dea

clear better, about start I’m supply been it’s just getting not wanted I I to curious but think worse. on chain, that it’s not getting

think better And in little have so your start and and bit improve a if and better little bit the over timing a when things then of allows improve that operate degree visibility some visibility to which but on anything stabilization to could to the level how confidence general the semiconductor do just you any or to some past three maybe touch of I you comments shipments months, you four improvement? into and

Scott Santi

from we’ve the are this but is, the would that of the popping gotten issues tactical I is think used now, there environment to that means certainly environment, pretty issues that say standpoint that new stable there up I everywhere. just

in tactics continue the that we’ve at from our a high serve to I our level standpoint to think, the of this businesses environment. customers employed

have some willingness and sheet We about inventory support certainly learned our talked our balance to use to Michael things. investments.

talked fact big have us the come have for supply really localized up We our chains here. about that

not a helped relationships key long it those things point. issues and in comfortable, this our this on of to operating environment. dramatically any certainly operate think we’re the at in, there’s gotten Our all basis but confronting us environment. suppliers daily used with I’m to this of of We’ve got going we’ve shrinking I don’t sort are in that say term But weekly set

and I mode I of not terms we is forward are think ahead, I the guess react not the visibility look our company. In think

We do are well to positioned that.

that going level the things on material we until actually And ground We to easier. at do. the it the it’s read to growth. certainly we’re conditions sort we’ll being attention improve point on to read of as leveraging stuff counting above up, strong And can is the consistent interesting, way. in into positions some market it. get at industry said, react always to get we a obviously That shows our start that You not point market turn but even And of read. and it same more continue to the

Joe O’Dea

at the game? a disruptions point are And sustained But some you of what about these you recovery, kind your level about talk your in through on when focus when have the share becomes That’s that those are that folks share one, just are tools What’s lost none have the then helpful. the second gains sticky place? happy of that kind the that confidence And it. I of who all focus victory. imagine

Scott Santi

in customers in the is And pandemic. is our an these of Well, we this ITW pandemic in focus is the how time these I challenges. of this. biggest transient customers this opportunity different what for that our true were biggest with our is really I and provides is not think to in portfolio a are there we our cases there games that of think demonstrate best And customers significant stress sort looking were and for best before and opportunistic opportunities us all across and

I is that biggest operating in ways best opportunities an customers for evidence expect there’s said, what And our looking truly sort anecdotal and difference this. way is. advantage perform of plenty model we the we to to an that have of said, ability are and of advantage where and ultimately the leverage our as ITW Michael We proved as that can what position I there’s

ability items winning today but supply, supply supply not of business and quality to are little just We high of products. because these our

in stepped I that is our real for markets fundamental at ITW in this the to people, model, core as our we said my serve the the capabilities our and challenge. view, in up differences think a pretty opportunity to So outset, demonstrate we business absolutely some in in have

Joe O’Dea

the bigger correctly, kind customers better confirm customers? so to my of at just would of be share new much penetration about the And wins existing portion understanding not

Scott Santi

the customers. That’s absolutely, in first key of Yes. care taking environment, priority existing this our

Operator

comes next the with of Your from question Baird. Dobre line Mig

Your is open. line

Mig Dobre

inflationary is of I’m Thank the looks different. like to curious put structured certainly there XX not much the increases there contracts in the discussion to everyone. pressures abate? as be has morning, pricing you on been pricing. differences and XX through are stick your and view segments, various to what question. And other? to How your that with you you customers? appreciate Do when your actually wanted that going your any these versus taking I had bit think conversations are quite I to for Good raw it pricing happens a or back material one go

Scott Santi

all, product but to nature offerings those unprecedented way pleased to there’s raw our in going increases. we’re financials costs able start stabilize a differentiated to the these in we down mean, we to individual the a price not adjust been appropriate across And we’ll of adjustments make I given cost that think, the offset you’ll of think the company, be first I don’t or and report. think and that back way, see when come in certainly that really meaningful have that I I discussions very Well, expect to customers, service certainly with if material we’ve pricing

Mig Dobre

operating follow of an question. more my then, And up is

years? over With past frankly, talked pandemic way have from I’m sites you what there manufacturing instance, the your we’re internally months being absenteeism seeing that way resilience prepared to in you’ve have just and handle changed to that various are is relative what the might had question question in really the And that three, this. you four I done and Omicron presuming operations. how maybe go how much own haven’t another this, years into if pure business about we was a now wave, You yet do some to are and to, couple you spike you output to the really you. say, Thank my operate through standpoint? the for internal two guess this related

Scott Santi

way I various the executed Well, all could is this we’ve the to point our, to through waves do point.

standpoint, think challenges alone the to two a been from now adjust a to up safety people pandemic years. is had we a let That’s standpoint, on for going coming on absolutely. there of have production the I

we But of the it. our and have way We’ve that’s part are to in certainly resilience, key responded a got So the a people about I talked our manufacturer. lot has company ability don’t, are we to to I execute. think

I’m able of our have like keep to production in our Of people done power to we lot lines a customers. our process? to to we everything course, everything we And so companies serve running things Have our within safe, be keep need, the comes learned have. and manner environment This so. with normal We’ll is ultimately not as through whatever very know, will continue our really but you strong to way these are all that negotiating a challenges way. we our deal a in comfortable do

Operator

Your question with Research. Coe comes Wolfe final of Nigel from line the

is open. line Your

Nigel Coe

I’m pushing the stuff wasn’t came going over but corporate that little very in last I modeled. a But really is I over this more the I you’ve I’m already couple covered. call, we in of terms what been a you’ve question, of, curious, than And that just if had little on costs apologize years. number a centralized know bit heavier expense

we Just be what and wondering XXXX? what should for that drove assume

Scott Santi

QX at unallocated the a the think million, higher about costs. I’m little QX transaction So, number that’s million you’re assuming I the was in MTS $XX talking is bit $XX difference and

assume purposes to million I $XX $XX next a somewhere modeling that million kind for I and in year, range. onetime for would think So of

Nigel Coe

assuming Okay, else time that free again, costs there clear. production XXX%, one if very as that helpful? like for but coming would I’m that’s be through that’s investments anything then sorry, working recover, okay, And cash you’ve got the you this capital so the conversion

Scott Santi

just higher to in I inventory. our supply environment. obviously think, then higher support No, with I receivables customers challenging investment inventory XX% in mean, the and a chain it’s growth, revenue the

that’s sheet. use smart think of pretty we our a So balance

what. that’s So

Operator

you Thank call. All may today’s lines There for disconnect. now questions. are no in participating further conference

Illinois Tool Works (ITW) 3 Feb 222021 Q4 Earnings call transcript