ITW - Earnings call transcript Q1 2024 | Illinois Tool Works Inc.

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Operator

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

You may begin your conference.

Erin Linnihan

Krista. you, Thank welcome and First XXXX Quarter Good to Call. Conference morning, ITW's of and by Mike O’Herlihy; President Fletcher. joined I'm CEO, Larsen, Relations, our Vice CFO, Today, and President Chris Karen President Senior and Investor Vice

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

Christopher O'Herlihy

everyone. Erin, good morning, you, Thank and

strong X% ITW including and execute our of margin on quarter. organic that deliver near-term our demand we came of as continued was the targets, a anticipated, favorable delivered start will profitability of delivered our year year-over-year. current ITW across high comparisons challenging results as While the to we very X based more we balance growth as for some [ performance to on level of the targets. Starting in certainly performance ] first the comparisons the track difficult to environment to And solid and year first the team and environment X%. The tough line. demand, expected. we remain XXXX the quarter was are levels of at of as versus Those solidly and in down X.X% majority segments X face deliver in performance demand a Organic the our on a confident team full on with year declined are growth the top segments

our in inventory XXX EPS X% and XXXX. GAAP expanded item, XX.X%, goal X% margin of strong onetime enterprise continue XXX the towards from to of points, XX% initiatives to by solid rate of free EPS conversion line we a increased operating QX contribution as The normal accounting progress cash with $X.XX. operating we with item, levels. XX% Excluding $X.XX operating flow was basis as grew a to income basis of XX%, onetime margin make excluding quarterly points grew

raise Looking operational margin the to remains item, ahead, our for our guidance year guidance for where did we onetime and GAAP unchanged. account EPS the

the to world expect for I the the to our more growth exceptional first potential. I in We will our my continue of performance, full customers call concluding and Michael over their remarks, of year Michael? And ITW's deliver of organic to to and we our detail the profitability are progress all year-over-year our our positioned want with full year. Combined comparisons end favorable dedication discuss guidance. as positive their to demand continuous majority serving and that around performance path as to excellence. quarter now our balance and our that XXXX of driving thank on updated efforts markets will colleagues firmly track current turn ITW for on to on levels well with well translate ITW continued guidance. In is the through our to across margin confident strong

Michael Larsen

to with margin environment some enterprise a high-quality operating $X.XX, X% XX.X% grew basis decline you, solid operating onetime organic item. basis of initiatives pretty and the good an Thank morning, a demand expected. Despite to in X.X%, In X% points challenging everyone. excluding contributed points. EPS a and start to QX, revenue Chris, income we increased as as delivered execution XXX improved year XXX

million, $XXX expanded XX.X%. increased basis flow our and repurchased cash to during free operating $XXX Our million XX% and to was XXX the we $X.XX, points as quarter margin of own planned. EPS shares

you saw include made decision a change morning, the LIFO As QX, LIFO share. inventory results of pretax in this growth more of to a the our million and FIFO businesses favorable the and onetime our in because environment, across to we method the $X.XX resulted U.S. to of a to cost simple from transition are to current that for balance In valuing GAAP summary, as all the accounting accounting method it inventory as impact equal operations. In QX $XXX we projected a improve inventory expected for consistent of year. through rates were our is results revenue go

margin a growth to by in discuss Our to be strong, organic geography. we're look track to on guidance slides. Please continues and few which performance solidly and our a on Slide X deliver for at I will profitability turn

America XX%. the North partially growth can Asia internationally, in X% Europe led X%, was positive China see, you by by decline up As grew as X% and grew offset Pacific

our the was X%. organic automotive Excluding in business, up rate Chinese OEM still growth XX% China growth in

X% year usual full and Europe, process, Pacific we in Asia both up mid-single digits, which is the demand, of for the based organic China. of expect by current growth levels and with North led X% our For on in to America

delivered and North X% driven grew results XX% segment, OEM gains. strong organic China and segment down market share solid penetration as starting X% being with America to which Europe continued by the grew of Automotive growth X% and on despite Moving

typical X% margins improved contributed more and China. Margin penetration the full in and to and XX.X%, was X% initiatives expect basis enterprise year, XXX solid outgrowth continued performance strong For points. continue as of profitability with by to points XXX basis we than to growth above-market gains our

said continue we we what on XXXX, segment, margin at the and would to on We low deliver in to do to Investor track margins year. which progress this last recall are mid-XXs make the enhancement we solid our will firmly plan in you by is Day

XX%. grew as North Food of plus America retail X. comparison and due was order by X% and business by a down of X%. product pretty And Equipment declined note, International encouraging quarter in fueled declined to expected On X% XX%, Turning X%. Asia launches America last revenue difficult was tough flat a with activity in Equipment the XX% against and was QX particularly X% comparison up region, overall Pacific revenue up to service year. plus new North a the first in X%, was the positive across organic Slide board. Europe

accelerate growth declined attractive in our of support result service as XX% our above-market improved While their in modestly subsegments focused of continued business. QX, organic to very Equipment investments a to margins and Food X margins capacity

we sequentially to go through as forward, the continue margins Looking expect to year. improve we

as MTS more this well challenging down and trends about headwind was a acquisition a margins electronic for continues this Turning but to and assembly. The Measurement due segment. to near-term XXX mix X% segment than tough & in recent plus perform in XX%. of diluted margins the X% despite Test Organic grew And Measurement With Electronics. demand down XX%. & midteens, Test to Electronics comparison points. grew improving, revenue that created modestly still was are basis by

the here from balance expect Test to Measurement year. of and we improve & we ahead, through go as margins Electronics Looking the

America in declined XX%, And declined X% Industrial X%. On X%. was from X% declined enterprise X% a positive down a By side and by note, flat region, of comparison geographic international China. & to North margin an operating the down were a XXX and America against the and versus Fluids international commercial revenue XX% XX% basis, comparison sales of and solid X%. XX.X%. and decline expected, to On which initiatives. Organic of environment margins was basis X% in North in consumables in Polymers XX X% Equipment declined Welding Slide as basis and aftermarket modestly points a Polymers QX. Operating declined led year-over-year as down points Moving X%, grew X. resulted quarter. improved demand were XX.X% faced essentially to automotive tough Fluids on declined contribution both improved plus with a and the comparison plus X%,

challenging the was a X%. demand international was Australia Products basis was and XX% Turning America and as and Zealand QX. XX%. X. New organic X% business in to markets in residential declined Construction global down Europe as down revenue be North And was down down on soft to Near-term remained as X% renovation Slide continue trends

On another by a primarily positive contribution note, solid driven XX.X%, operating XXX enterprise basis margin points to from initiatives. improved

Finally, Specialty businesses. revenue growth due of to X Organic in timing the Products. was primarily orders large up X% European equipment

X%. As North was up XX% America down international a result, was and

results guidance. to have points solidly talked driven track leverage with to some as move involves we're above-market line let's margin simplification about segment full XX.X%, that, operating initiatives. With and by in product consistent an were that significant and strategic enterprise on line for performance right XXXX we portfolio guidance. working on deliver X from we contribution XXXX improved QX our reposition we're expectations, the work forward. Operating year to more update solid basis our organic before, go targets a and which Slide on growth, As for XXX Specialty With to our

new a by points expected typical Looking usual line, pricing points as inflationary see X% in guidance rates of XXX ahead a headwind includes to adjusted is and the seasonality. Operating XX at to starting from year-over-year growth inventory and to and than initiatives, to based some for contribution onetime our of range favorable demand, destocking. Per normalized do of basis forward, enterprise points in from environment, stable X% move from XX% the product improve our positives item on with we top XXX and current QX. run the which we XX%, terms meaningful more organic is midpoint no basis margin process, basis launches more comparisons

every another we margin to net on strong across with again, is than performance, to remain operating the mentioned return conversion on greater in capital call, expect I free again, their cash firmly XXXX from and income. above contribution XX%, board. After-tax projecting flows, As segment with improve is expected initiatives last solid enterprise our

$XX.XX, full of essentially $X.XX our accounting this of expect higher from from of new an to interest includes income XX.X%. with inventory GAAP to XX% you aside, our rate operational that year range saw the range in a about As we as guidance of the taxes $XX.XX $X.XX raised we now unchanged item Setting a headwind expected expense, combined EPS QX morning, and EPS remains change. which currency guidance tax to

comparison. usual. To expect the team through half, levels balance to split the to our year, compares execute the cadence of anticipate continues split first for about we at as loaded first favorable of a of up, than very onetime we high will less item current second quarter on which expected, terms challenging slightly we year year in be the environment, EPS half level, the XX-XX our factor so near-term ITW to typical the this which back-end XX-XX, In go demand in we wrap demand as as things a and improve of more based in

note, addition, on first track as results on deliver are guidance. On in separate Karen is call. and quarter our Fletcher's XXXX ITW came expected, last a In today earnings our we solidly to

as of ITW most quality, retirement. ITW position industrial and in to last the to plan X the our and in articulating thanking years, manner. in her leverage best and world's contributions the community in us one to best respected helped full them Chris all Over has ITW's and wishing performing differentiated her In investment join potential doing competitive and you advantages Karen, been compelling a and companies. highest their for me Karen she the instrumental clear many unique Please to so, has

Karen Fletcher

and lot, Thank privilege been a you, Michael. to That ] a means that. it's do [

Michael Larsen

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

Erin Linnihan

Thank open line the Michael. for you please Krista, you, will questions?

Operator

Securities. Instructions] Truist from comes first Instructions] Jamie question from [Operator Cook Your [Operator

Jamie Cook

past Congrats X for years. Karen, thanks over all the your and help

Karen Fletcher

you, Thank Jamie.

Jamie Cook

Food side, think, in order on My some America. Equipment the question noted you first North positive Michael, I activity

to you just could capacity And a Specialty actions how you in much much just are to -- for the on organic I speak follow-up a Specialty. about? And margin headwind growth is little guess, of PLS, year? how you're taking how question, PLS, you could taking you you seeing that that actions? Where within And then headwind what more my spoke know is spoke then If there. portfolio color much I was there? just to give investments the a

Michael Larsen

to going think I I'm X that Jamie. was questions one, in try....

Jamie Cook

quarter so get... I [indiscernible]

Michael Larsen

to going here. try my best I'm

really segments, we're step these So that said, little take for Food unusual the you -- rates comment driven, challenging dealing these a our significant growth for is I really as on which [ of us, many a think ] back, comparisons are I by Equipment. Food within Equipment, if comparisons

in the North return we're around the [indiscernible] give quarter is in first growth Equipment credibility. about that margin right QX. service to including more forward. The which of QX points a America, it's is Food basis we're digit go typical I company, here in color, growth of advantage impact are think we here XXX huge some we not sitting result a So in saying additional grew and a double the expecting even What really necessarily Equipment a rates as additional pressure, business. as backlog-driven margin front And us of in was in which though here the in order Food directed and our opportunity that's taking

competitive OEM So advantage to demand the segment. service Equipment of in the talking know, captive help you number with which what attractive business, business. adding one for significant And about of most as is technicians is we're of this in us we're the a our meet huge only us parts service the a Food

-- don't that those add to that, want you think if to X the food were questions know around Chris? equipment. I I anything So

Christopher O'Herlihy

-- the on [ I opportunity the captive manufacturer. on of point of Food, to service within this undoubtedly this point is investment us. what the service for stellar guess, growth aspect side just And a ] the capitalize I necessary at unique an with business accentuate differentiation No. the is

Michael Larsen

organic on is articulate product And plus in -- consistent reposition rate expect What we was is basis line and business move this as those simplification, our then we basis. on trying forward go-forward meaningful Specialty, a PLS, growth here for growth the strategically around X% large we're that that orders Europe. still timing of a by in businesses driven really the on to X equipment and

X%. we we call We down what had so a as kind segment last as still forward. And of meaningful be to I don't move at think move to expect is guided And to from that count on impact saying the our organic we this X% we're forward. growth X%

-- [ And with here margins. margins meaningful same the margins to what And and so when I is is mean, please businesses seeing the segment. mind. I the in keep in the growth operating you're we for leverage that the way these contributing happens true we in some get on XX.X% a ] Specialty what think in here operating what

kind but maybe that's high are that still a expect more basis, in QX, the and think margins very -- profitable that not is an growth on bit with little think I to we anomaly, a I go-forward -- both a rate starts of to and something margins of XX. return XXs, not

Jamie Cook

Congrats again, Karen.

Karen Fletcher

Jamie. Thanks,

Operator

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

Tami Zakaria

forward you, First you. Karen, And of Aaron, off to luck. I I'll definitely best looking miss but wish working with you all aboard, the to welcome

Karen Fletcher

Thanks, Tami.

Tami Zakaria

course. Of

to growth? year within first my the I -- balance be mean X% year. you here. is the positive So XQ throughout you growth color just expect expect full growth of organic organic to that to do question little be that range wanted get of X% to a Does

Michael Larsen

if what will a is tell we're OEM, builds revenues a a QX mid-single there in in from seeing an low single from in to typically model QX, of that you So into current Tami, demand them, out call as to or bit step-up to guidance. give you try digits and QX. digits help you in improvement here well. What we know, I meaningful of quarterly low as and increase the rate QX, the levels automotive actually, you run little we don't the to kind in And QX as is

that comparison in It basis, of our really will slightly certainly see organic positive step-up here. you what's slightly the QX. And guidance in up in the more here up a X% in the kind on But second which is higher year, of see year, a QX. X% last in in we'll revenues given easier implied we're is year-over-year half QX possible So growth starts gets that QX. the meaningful

half So in think the slightly improve then the year. first of first year, maybe to comparisons in about maybe second the improvement and flattish it relative of half in half, X the by as of the points an kind positive the year-over-year

the those track, second second growth low to compared current and to I the the in X additional for half. And might for you'd revenue flat that see there year, year provide second half ] which half at rates [ last organic essentially digits revenues run rates, some expect in just in ecoshipping year, in single keeping were half this So positive add the least mathematically us. at growth are second days should the last

Tami Zakaria

Got it. That's similar is the one, very margin but helpful. question the My side. second to first on

points only $XX about had quarter That's margin tailwind in basis the came in guide first think I $XXX about the were you the by year, better that for most people full on what XX first modeling. also full million. a raised quarter, the little but tailwind. the And Street you than year million

Just there XX headwind than maybe full trying you originally X next the to any price Or is is incremental points? your only understand, year thought? as that basis it we quarters, or think just the pressures by cost guide cost about conservatism raised

Michael Larsen

would what of with you Tami, points here, item, rates. if as initiatives, basis XXX onetime operational our in first Well, margins expect, do the quarter. And points performance going And margin we're a overall out. from the pleased here improved through I we saw sequentially from exclude really quarter basis that is on XX.X% pretty the here say, expansion first accomplishment the do XXX and for margin you typically margins we that year significant as at is

and to front-to-back sequentially similar don't quarter you should highlight XX/XX projects. want we second improvement think growth you do QX pure in about higher tied these we and second concerns then to restructuring into some So These expect again a projects the restructuring would only I the year, for modest to QX. The are are -- as QX and quarter. second is as to this last quarter, QX you is from see a thing all think planned are volume I typical that tied not around the any to expense whatsoever. typically that

on we on I X So improved -- year again, process year-over-year down through expect said, every -- and go for quick in current the X X based basis. as real margins environment of we here segments on of planning the a and year improve And as in with and segments. X bottom-up including with QX, the our just consistent full margins will that segment revenues

Operator

Steve question next comes from Your with Volkmann Jefferies.

Stephen Volkmann

Erin, and that miss cadence Karen, so and impressed can And congratulations, already well. we I Great. down my have add I'm you will Karen's welcome. you

So...

Karen Fletcher

you. Thank

Stephen Volkmann

China? a there. us seemed an quite be color on to guess, of ask that, little about of a you that? give to can bit bit I even That seem automotive, bit a good. without Can things Any be relatively outlier I but that

Michael Larsen

Yes.

think Even And Polymers business, growing the there the great obviously still market and on doing XX%. side OEM share. I & up is pointed was out, as China said, you driver I job on Fluids. contribution excluding content gaining Steve, vehicles, those, is X% a EV up new year-over-year. Strong as big Automotive our team the including from

market Some in contributed, batteries differentiated on also Measurement of & side EV of of the we grew unique Equipment. and Specialty Food share products that and the process really is things these of the where also and assembly bonding gains some product. to tied a have Test

looks geography sustainable digits to of full said, moving But as be think here, really a as which forward, from to certainly China. solid half, we encouraging. bit So speaks performance standpoint are. being comps as of single is kind the as again, high little the up more diversified I I then year, benefit get the And across And difficult. second mid- for we the the a in it QX China the board, and pretty say go into we'd in that should

first And benefit in but which Europe so North in and is big in a offset really America, quarter for us. some certainly China, the challenges in

Stephen Volkmann

something? follow-up Super. think should enterprise the I basis trying margins. sense than on and And total year said think cadence And progresses. the well year points the of I'm of in there. just there, better Automotive or then know, a the how points exit we rate as you enterprise XXX is maybe Obviously, auto of going get I margins And don't or basis XXX to the

Michael Larsen

mean, I maybe regression are. that's range. lot Yes. a I in probably And where up better year, These expect I I half. sustainable we in here little a the think think for the XX%-plus end the wouldn't are bit of where we'll from back absolutely

assumptions. basis. picture, on be depends Some little the restructuring really I'd big bit year-over-year progress here of the in second of There might that on here a build solid say, quarter. But Automotive a

expect we We lots a an almost XX%, basis go XX% room of and improvement work in through margins plan. of XXX our to on year-over-year enhancement points full margin as basis range, year

Christopher O'Herlihy

as enterprise Yes. plan and back margins time a And at I Day, that, outlined I much Steve, to [ that's get suppose ], of very to is to improvement track to an we initiatives over this the combination just volume largely mid-XXs support low higher-margin on our by Investor mean, recovery, that to XXXX, innovation.

So that in both cadence again very tracking 'XX, last our to in respect with outlined year. much Investor on and 'XX what we're Day at we

Michael Larsen

Yes.

terms of of room in margins in lots from nothing QX sustainable, here. improvement for and with unusual So the

Operator

question next Andy from Kaplowitz Citigroup. with Your comes

Andrew Kaplowitz

Karen, miss congratulations. We'll you.

Karen Fletcher

Andy. Thanks,

Andrew Kaplowitz

to probably, segments a higher segments be and has I'm X Specialty other I than bit forward Michael, X to about Construction, want the of weaker your forecast [ the just segments X organic guessing orders. to you better, you X, you your actually in equipment any to X. you start? changed pull of and and be were a like was think, little quarter, growth were that know Specialty reset all? between thought but talked at ] much [ X down, to some And guide outlook other [ ] segment's up projected So had I the ] every while level, for don't

Michael Larsen

to as I some short pressure some when are all competitive kind standpoint organic geographically. typically that's, of given you're market I look evens going I tell you're talked going businesses, I growth guidance to diversified think being of for guidance. And And be the again, it are the our is, bit And performing same update will the there's you is segments don't maybe what more as about we that are every this portfolio, quarter. advantage to our a those a right. with We at want to Andy, you just that and think, puts true segments to always And are a that better. always out by things from term. little portfolio X% offset have in X% little And the takes.

So some year from talked say I'm not the through but really puts And segment definitely to overall, go on we our to by there's segment firmly full takes. last that. going But and here, I'd call. on off not certainly, guidance, too what deliver far we're about on track

Andrew Kaplowitz

to Michael, you you forward just color there? differences give little in was Welding, this a sort do a There see Are us going that's little maybe still year, between that some last bit you what commercial year. early getting and past going on maybe [ more there. industrial ] of markets, then helpful. see destocking And what and

Michael Larsen

Yes.

year-over-year. the From -- driver we driving really think go rates the I big that's comparisons forward. here a as is the growth

for so And the Welding like these a growth easier. Welding, first that year in company, XX% growth year, we the it's the not quarter as is for comparisons true I in go obviously through just get also last total rate. sustainable said,

on the last board, with was surprise a meaningful is we big this just dealt down year, but organic wasn't it across so revenue X%. I'd and positive in really on point And note, And that magnitude, inventory true Welding say some the a not us and a year, of at point the point. essentially channel. headwind this of organic our growth in the customers to at from behind percentage rate last is drag that excess

a positive And of the kind of we've new environment, that's terms in the exciting term. we're here in an in being pricing board, Welding. launched back got then to are including the where that near across lineup So news normal products

over with Welding. together, put fact again. The operating growth. speaks I feel margins at just outlook team that performance obviously, of margins plus, on in and plan. strong is And the we line, focus highlight we XX% margin that all maybe that but well really executing about good And Top the really will of the you of growth so down that -- really is on quality have the revenues here and to quantity

Andrew Kaplowitz

the on Agreed performance. margin

Operator

Your America. Andrew comes next Obin with from Bank of question

Sabrina Abrams

Obin. on have Andrew You Sabrina Congratulations, Abrams Karen. for

Karen Fletcher

Thanks, Sabrina.

Sabrina Abrams

the On margin to as maybe through thinking you're maybe full the the different about and year the are year, to guide? volume move cost, walk initiatives we changes enterprise through how could side, we like reinvestment price how there relate like any buckets leverage, the in they

Michael Larsen

Yes.

not talked last I from think call. change there's the a what lot on we about of

are growth. is We to X% picture at guidance our operating big here. kind of positive operational maintaining organic There X% some leverage.

has slightly expect point. on We based normalized points. Price/cost XXX the more enterprise at is essentially initiatives, here basis QX which at than basis of points performance XXX strong in this

to back end margin that then thing the a more to points, in now. And QX around the and I pressures So the good as XXX there little of of last as standpoint last is employee-related some used maybe year, And basis we done some talked right magnitude, XXX we inflationary of call, is year. about add moderate cost modest an just about basis favorability around from price/cost the we managing points headwind a versus the the we of headwind. used job, from be go have the That cost through on Order talk accounting bit XXX, benefits. that's would then change. a

range XX% year So full how that's new of XX%. and margin accounting points improvement in for factoring XXX the change of in you get to the basis QX, the that to LIFO

Sabrina Abrams

comps pressured And bottom has Has X seeing clearly, but this been electronics are what for of or are your you are guys demand? Because X out the then this in what And terms market you customers? getting to now, easier. quarters hearing yet? started from

Michael Larsen

so a little there. I a picture Well, mixed it's of bit think

businesses. year, year, semi-related talked I of magnitude about Last those last lot order XX% we the challenges to XX%. in were down think a the

we're about total These kind segment, ITW of the just of Measurement to talking revenues. things. Now XX% Electronics & Test of and X% about size businesses represent

markets semi context. The to put that just out. appear to bottomed in things of So positive kind the news is have

the no positive deferred. segment. So maybe this but growth here They recovery of the rate on longer the slightly is were actually in has been QX drag a overall inevitable

bit half come, we today. And year, And a in pressure bit guidance electronic I what of when side in assembly then script, a seeing second said exactly little the to whether the next tell. of so the told or our factored in that's things. that will It's into you little we're is not hard as of

that's X% to is maybe this drove being here and down what more So electronics tied in quarter. electronics, first consumer the

Operator

with from Your Mig Dobre Baird. next comes question

Mircea Dobre

[indiscernible] best join I'll years. these in really all all retirement Karen, the the and here. over And the help appreciate

Karen Fletcher

Mig. Thanks,

Mircea Dobre

question came about One one a bit that frankly, themes has been in was this the Europe, had little would EMEA, guessed. has than guess not great. I that have earnings I frankly, which, during been better season I of

it a items I'm of onetime helped about kind of might there more So curious is you're quarter? the talk Or what is seeing Specialty shoots in that have kind to Europe kind of there, in Europe? just function of the green

Michael Larsen

and XX% the a as Construction and driver stable, pretty orders & a a first little businesses. overall, flat. from anominally, been was will standpoint the this point. for as -- at overall that drag little some about to quarter. obviously year. And But bit. That's positive But has and Measurement down was these up through more X%; Specialty -- go timing then around Welding up & then an X equipment over I'd of bit dollar we little the those a Equipment say big a it well the Test Fluids Specialty the internationally as was return X%; growth the a down mean businesses smaller Products, remains Europe in up bit year and here Automotive I here here Food those in of Electronics, Polymers

double still growth the down organic So was in quarter. overall, Europe. Construction But digit in X% here quarter the first positive first in

Mircea Dobre

what some also year Understood. the And of we you destocking be this How since was you're follow-up in the that of seeing way [ America. sort Is need a through going a bit ] North about be segment you Construction, progress here? can effect there. can of? clarify think aware to And there mentioned you to sort that my little do

what You [indiscernible] talked on about -- you're things? I'm seeing curious

Michael Larsen

Yes.

But performance all X% the in performance than That business impressive. the if of teens centers it's expect in that a low first we as the in actually if of the actually, market, to side, is lot in market. soft. little than was we way here down the quarter. are to fairly go remodel, challenging overall, that, to is down year. in outperforming bit think mean remain a you be pretty overall, part pretty your is more more example a challenging down. to X%. down you good XX% key I in home very I continues commercial look that. And little less the a think, a business, side that than down business about that even illustration on mean, down the of think maybe commercial small It's be the of we is the resilient I global certainly metrics, and question, business, America, that. a a bit that The only at market North the about and the it's Construction, overall of a down balance frankly, I Residential through how said

is we any guidance, we If of were in to look expected to our some performance. pretty what's together, at certainly Construction put is category. without margin then time be the And X% margins Construction business drive said delivering X% last here performance for our volume really XX% to helping down and the leverage. Again, remarkable I've you them we plus that

Erin Linnihan

And think one we'll question, more take I please.

Operator

Your Barclays. from Julian next with Mitchell comes question

Matthew Pan

This Julian Barclays. Pan is team Mitchell's Matthew at from

dial -- they could on Can one in margins, if expand they XXXX Just overall? TME in year-over-year. the were on down you

Michael Larsen

remarks And implementing is organic And grew as I the the X certainly in, are terms the of of business, model, of performance answer the business only in in which the said which at XX% to think one years is yes. margins due great I margins strong short a but in Test performance. ITW really reasons, down prepared mid-teens business. the MTS quarter first Measurement plus that that in in the that -- the The we're & is were fact

basis & And mix margins XXX effect diluted that the in by there's points. Measurement negative about so a Test

segment. from balance the improve starting and and through we margins here QX as do then will go of the expect we that Test Electronics Now the year, forward, in & Measurement

where -- If kind we're full to to year you were we kind historically, expectation. of is look for kind here be of of going current at we're the mid-XXs just back the the

like to year-over-year expect every basis. segment, Electronics, in a So including margins in & we Test on Measurement improve and

So...

Christopher O'Herlihy

innovation, that just & progression which that in underpin Test fertile environment margin will would going segment. for add In an there's and Electronics, forward extremely Measurement I

Michael Larsen

Yes.

Matthew Pan

thoughts quick a that QX. And cash that your just And follow-up. down what Is a then free year-over-year QX? just build? it. flow up are The capital was working Got in Is year-over-year? on

Michael Larsen

Yes.

normal $XXX to the It it's inventory year-end to Working think the look accounting this inventory, quarter. from factor decline it QX, cash looks look close a certainly like which if have year-over-year an out in looks actually inventory at conversion, free you of on first of -- at seasonality. million basis. it's you I flow in capital, kind LIFO if added pretty increase you change, the a

do flat relative team that about you to was quarter in increase which inventory million first we or able of you'll that, when quarter, increase $XX actually inventory the see offset. the typically to the If in a was X% year-end see

still Now that said, to levels. elevated are months relative our on hand pre-COVID

is those kind that pre-COVID to were hand. improvement, we're there we has normalized. pre-COVID, X, some here of believe to lot so opportunity more around And low drive right months the Xs levels inventory chain we given but on in the in that -- We're supply levels certainly back a

cash we you which the And as performance as of expect guidance the XXX% full should a go of today, for conversion we with a free continued is gave so through that, flow that's year. the plus strong year. result consistent And

overall of from expect cash result the you've think ITW. of to flow, which QX go balance levels, come year kind free I strong So our typical inventory more through terms in the reducing of in as will as performance to come in and we

Operator

question-and-answer our concludes That conference and session. participation, may And for your today's call. with you that, you disconnect. conclude that Thank now does

Illinois Tool Works (ITW) 30 Apr 242024 Q1 Earnings call transcript