LECO - Earnings call transcript Q3 2020 | Lincoln Electric Holdings, Inc.

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Operator

Greetings, and welcome to Lincoln Electric 2020 Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. And this call is being recorded. It is my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you.

begin. may You

Amanda Butler

as and Electric XXXX Howard, financial everyone. to Investor as our Welcome earlier slide section. this Thank as Relations at presentation quarter good lincolnelectric.com conference Electric's well release find can third and the our attachment call. Lincoln to today, call's Lincoln you, on you morning, an website We results the released in

our Officer; quarterly Chief overview Mapes, on Officer. Lincoln's is Chairman, our and financial in the Gabe initiatives, Chief and of our third me begin Bruno, Joining will results cover reduction Chris more Executive Financial an Chris Gabe the results call President with will detail. and quarter cost today discussion and our

number questions. certain our please risks expectations forms and press a from in But before Following to XX-Q. in of made remarks, statements actual materially our SEC our may of prepared we release A note results that discussion, your discussion results and we're be provided that our this our on take filings happy call during uncertainties differ due affect our and forward-looking of are may factors. start the to XX-K and risk some may

our turn section U.S. Investor financial with the release, do the measures And in Mapes. addition, website to In discuss which I'll we reconciliation in not GAAP. conform again our to available Relations of most GAAP earnings call Chris? that the Chris at measure tables in that, financial to comparable A is the measures non-GAAP of lincolnelectric.com. over is found

Chris Mapes

I'm while our that outstanding team. proud operating challenging organization for and our a long-term value in continue environment the and like pandemic. third issues report with It our again is quarter everyone. highlight morning, customers generating did Good to our Thank very global you, Amanda. to pleased to job servicing associated strong results the of we stakeholders. navigate once important, safely I'd as entire I'm an

savings we expectations. Adjusted cost in and cash recovery at generation third operating our XX.X%. per to to on XX.X% $X.XX, management year share leverage, This performance quarter our strength. to a to capital As we flow $XX and decremental $XX steady margins income quartile invested strong We prior adjusted move versus XXX% momentum of margin channel resulted narrowed free strong the exceeded million returns in was conversion. million, operating declines improved with earnings benefits. due Sales and XX.X% at generated at price retail Slide top quarter. relatively on Cash X, X.X% held flow increased

invest to million We We our support continue dividend. growth in shareholders and efficiency. projects through $XX and the business focused on long-term to our operational to goals strategic remain returned

balance confidence allows the share part repurchases remains to long-term strategy. in sheet model capital liquidity increase the growth, allocation strong and invest our business and as Our of in levels reduced with dividend debt increased our us and resume our

demand reportable Slide to third X. improvement sequential all the saw quarter across The trends in segments. Moving through business

quarter. year-over-year improved our By in for and by products, percent our performance has Asia mid-teens While the a growth fabrication general to XX% By the mid-single-digit in geography, a percent to the declining resilient, led in the in declines pace single-digit the of single-digit and high steady most approximately while by construction revenue demand sector improved broader end mid- all automation standard sales exposed declines across systems sector, was high recovery percent quarter, geographies and rate. rate, to remained up consumable differed declines region, Pacific the equipment infrastructure, percent Americas. of with in Europe,

energy sector production oil year remained higher demand compressed spending driving recovered and and the for Capital as further substantially levels Our in in automotive the range low Chinese and industry on consumables. narrowed investments weak capital quarter, U.S. auto the prices. in prior to challenged. mid-XX% Heavy declines

Harris in in increased channel notable was Group Products retail segment the the strength the quarter, in Additionally, our DIY driven sector. by

the the of year at seasonal of and activity with OEM we in have over ongoing production seen across typical their all reemergence fourth we October that end the concerns have COVID, As approach plans, the quarter, we segments. slowing

expect quarter the rate decline sales We quarter. fourth to similar organic at third as a

X. Turning to Slide

$XX $XX the stringent in maintained third recovery, million. controls increased savings which uncertainty Given and initial resulted the savings shape cost the quarter exceeded recognize our quarter. in plan in $XX This million cost in we to temporary million savings, in permanent substantially of of

generate $XX million to to split now of permanent rate million the XXXX, savings expect savings fourth in million cost $XX As cost relatively savings $XX result, temporary in a $XX between run of in exit $XX million million and to savings. approximately cost we a with quarter,

this expect of range. decremental XX% low the in We teens to will fourth quarter result margins high

in challenging of into remain regions line XX% XXXX invest to brand. Looking shareholders. cycle to the our business end in generate savings ability to capture half XXXX, to of while growth Lincoln's creation legacy cash strengths incremental the an incremental and XXXX, in value margins and our markets demonstrated the Lincoln's global year returning has million long-term our as our temporary growth improving that generate through the million of in incremental actions, to I top in with first of is deliver a in cost This we these permanent our rebound. with are higher even us markets compensation savings quarter. XXXX, of hallmark It navigating cost substantially and and model to and the XXX-year position $X normalized team, next combined our incentive wage to to year $XX $XX expect These costs year. XX% confident to position first and ability strength million

the to organization with the for been Americas over as his Welding call over Hedlund Welding. Steve turn of Steve XX President Gabe, I role like years. to Before International expanded on I'd congratulate has both and

standardized of our as been two he's regional leadership which in his During and felt experiences, years pass I'll call more strategies, the centralize processes, detail. development Gabe standard several execute leverage the development higher global growth customer efficient we're to leverages back-office third of to opted to higher we review structure We've of to to welding financials consistent accelerate platforms. leadership a And Steve that more excellent segments quarter an and we under product tenure, services XXXX now instrumental welding After on the strategy. investments in shared align strategy, the strategy. position in our standard XXXX the our to

Gabe Bruno

Thank you, Chris.

X. Slide to Moving

as an foreign unfavorable from points lower exchange. XX of impact third benefit and X.X% basis consolidated quarter by price X.X% from declined sales the X.X% Our was volumes offset

unfavorable Our profit benefits of were relatively reduction actions points from basis and decreased margin gross XX to Price management by as the price offset cost was even volumes. lower the impact in third XX.X% cost quarter.

million $XX as savings and of SG&A from points reduction to $X XX compensation. declined reflecting SG&A, or cost Our expense lower a percentage XX.X%. million, our actions in incentive XX.X% sales, decreased basis

segment. an pension $X.X sales. million results approximately in decreased year-over-year quarter. Operating compensation the $X.X expect rationalization of or million settlement XX.X% of to quarter million fourth included also in income incentive included charges. Americas million The expense of $XX.X XX.X% Reported in We $X.X the increase charge a operating income

from versus million or declined cost X.X% operating lower a $X operating the income Excluding year. benefited million expenses. sales, incentive special savings of $XX Adjusted million to point adjusted prior XX and compensation $XX items, in income increase in XX.X% basis

adjusted decremental margin Our XX.X% in income quarter. the operating was

to period. prior Our was with year in mix to This be items. items. third XX.X% quarter rate XXXX earnings the XX% rate compares the mix tax effective discrete of low and in our anticipated of to year expect range, of our We earnings due XX.X% full and extent tax the discrete effective tax subject now

per compared in to share year. $X.XX to decreased earnings XX.X% $X.XX the diluted quarter prior Third

of year increased from $X.XX earnings special adjusted items, Excluding diluted per from period prior to EPS the $X.XX share $X.XX.

segment's XX.X% cost by our spending EBIT reportable segments to quarter adjusted points benefits Americas Slide activities, as from The declined million. X. reduction incentive impact margin to the lower Now on volumes. XX lower compensation lower Welding $XX.X basis expense offset to were and XX.X% adjusted of EBIT declined moving discretionary third

Looking at price with trends in XX was infrastructure performance segment's decline reported as a price. general improving well construction point decline Americas reflecting as growth a organic in steady Welding basis the automotive. The XX.X% in demand sales, top reasonably line, industries, in and

key and Moving million EBIT to lower mitigate the points to decreased to the reduction Slide The activities, European increased end X.X%, ongoing X. helped Organic Asia basis performance organic relatively XXX compared XX.X% with the International in Welding $XX.X adjusted adjusted lower in spending recovery and sales EBIT segment's from sectors Benefits prior increased steady of cost impact discretionary year. Pacific margin reflecting X.X%. volumes. sales

Group Products Moving Slide on to XX. Harris the

XXX American increased broad EBIT on adjusted commodity and retail improvement the increased Growth end Harris' drove in in cost Adjusted costs, price channel XX.X% $XX.X the in XX.X% retail reduction XX.X%. quarter basis resulted growth in to a Price and to margin increased in notably markets and in rising Strong channel, volumes. increase copper. margin silver North record other XX.X% points EBIT performance. management million. actions Third

generated in capital strong inventory flow. conversion and ratio continue sequentially to leverage as a cash built cash to established free Moving Slide from XXX% the flow $XX XX. remained support we elevated Working million intentionally We recovery. to cash improved but operations previously from

sheet liquidity sequentially We ratio the in profile in our third maintained expect quarter. balance improve We our position working to capital strong and the a fourth quarter. strengthened

Slide highlighted We As liquidity with balance in near-term our maintained an profile which $XX debt the debt no have million quarter, further maturities. we $XXX million. increased reduced XX, on to by investment-grade sheet short-term

generation quarter expected conversion capital cash continued working and to lower deliver performance. use of fourth strong in strong flow Our cash the is

Moving to Slide XX.

expect maintain the consecutive the million We to be by dividend spending shareholders quarter in annual returned strategy. our $XX of XXth we $XX week, capital our dividend program. $XX full $XX And range million capital to invested disciplined million announced year X.X%. during to are to in and capital through last We allocation increase our million. now continuing We third spending

generation, our Given we that, the strategy, return would questions. repurchases balance our confidence now we I flow With to and on basis. resuming an opportunistic quartile are are share over as of for performance, and sheet maintaining part activity of the top and strength call growth cash turn M&A like

Amanda Butler

the us could questions? lead queue of Howard, you into

Operator

from Our from comment Instructions] the line Jefferies. Boroditsky or question of [Operator first Saree comes

line is open. Your

Saree Boroditsky

you which are resuming and continuation know expected a in volumes. potentially came purchases, like looks they than voluntary and separation building points volumes also initiated share a inventory some but of you lower So it to better program

of let's thinking So maybe talk lot just I point. a how region? about how there's but a by uncertainty, it this differs know about you're recovery at

Chris Mapes

had Products about recovery still The when point. choppy. to you this Chris. really the Saree mean particular your business quarter the business and segment yourself Look business. HVAC think Harris as saw the we as of looks very saw market is results, outstanding area an and Well, do towards business as from that we well And I from the our very their retail strong our the it recovery positioned think that marketplace. I demand

trailing the that with recoveries in Americas of that world. quarter, Asia conversations recovery. Our in from to during service with But and little support that through believe in Southeast a quickly especially really could other customers international models marketplace. we're this that's business we in the some to the ensuring place pleased believe areas And benefiting more but customer a the continued recover you inventories very And the follow-up has our we're putting space relative in improve in that performance bit I we've started Europe. to been and is were the seeing to our particular having I our

with and a XX% by in got also and still still we But are with we well of As gas as bit exposed markets shared industry improvements out we now of little it's We oil see to challenges are you associated of the heavy growing some what some markets we've saw some that the choppy. that believe as revenue sectors. segment, the there.

believe opportunity XXXX the XXXX. us especially parts we're migrating Although for we through as in that latter that an be could certainly of

with moving executed still and happy business a very to in very the still quarter our continue see managing to that we're marketplace, going choppy very the about the in demand believing way the business XXXX. into teams opportunistic improvements but So in

Saree Boroditsky

what to Could you very know actual volume on then guidance customer about then quarter of selling you're with your seeing had quarter. And know Harris versus you fourth you're talk growth in maybe you pricing this obviously demand And how retail think inherited XXXX? about related a any this demand in versus in the you strong any restocking.

Chris Mapes

anything of demand team would at that relates necessarily QX, than other And think wasn't in the of business. day we Harris. in expect that the and the to driven Gabe that Harris that necessarily the wouldn't saw to talk the do it's model replicate QX But was as we look, I able a or year we've unique happy pricing be XXXX. the minute unique and replicate expect but that But we're the above We channels. by in to I in Well, let with consumer there from demand made as it those expect level a we've we're work it it closely that QX And about into channel level being that at continued end demand great that that around and that migrating expect at repeat improvements by still level nor very next at necessarily it obviously that we to behavior execution centered pandemic. the the seen I QX, at for repeat at very wouldn't in wouldn't this demand would very although good business particular us would surge QX. with the is meet that

Gabe Bruno

a add to on as mentioned. just pricing comment Saree so Yes, Chris

commodity a pricing have mechanism we in prices disciplined change. place as So, very

So, driven we we those which changes that quarter that prices as the head. the predict were prices, on commodities, discipline adjust can't will appropriate. saw you to general where move in the and have silver as the in pricing escalation pricing third also in But copper by

Operator

from from Our next of Stifel. Jones the question comes or line Nathan comment

Your open. is line

Nathan Jones

got you guys question it's follow-up pricing particularly good customers fairly up, is the recent to very that on it's certainly copper on on given some if pretty the any commodities the Harris, little from in shown leverage pricing power. story, otherwise difficult pricing half has Saree's there you through been going where the push half has really pricing to is Copper push for DIY And channel, advantage Do these was of bit the pricing. I here. through but pretty there that, pricing inflation got some first taking there? are Should kind year strong that to volume expect of think as of to flat. well? first XQ a the And of to able we of be was next Harris maintain see in the they through

Chris Mapes

mix likes. about a different the in largely its portions component brazing Well, retail channel and sector. right you're talking be and costs Nathan HVAC that terms to on the just of clear within dynamic Harris has of other product and business the commodity into the We're our that's tied

really commodity side the So quarter. right that's content. of copper And you're during silver of that more did to the business on of portion escalation business costs third see more exposure the and silver the in the we significant our has the

be different So change that will that's a as dynamic prices copper further.

Nathan Jones

Okay.

in be the So that changes should much of commodity pricing sound doesn't like pricing. outside there in the change

three is mean, if over imply quarters would just where pricing increases next the it maintaining it is the to - for that? comparisons Harris you're just expect So price double-digit reasonable us for I

Chris Mapes

on where silver prices It and depend go. would copper

we tie our commodities. the change in - those to So mechanism pricing

pricing increase So adjust silver we'll and appropriate. then if copper as to continue our

Nathan Jones

lockdowns over very good there buying in of on on only digits in changes there, Some the see they're side Europe? customer started COVID about you international increase patterns - down coming parts cases concerned in again? to volume the maybe improvement Any revenue getting have certain with mid-single as over

Chris Mapes

QX with how in European the as one the migrating we're cases it unaware will us some you driven perform the they've demand had relates of not our point across broad been Europe. the in through Nathan, uncertainty the that reasons into businesses. with in in the QX why we're But share the media as about Yes coming business some thinking just can of that but and to time, COVID associated COVID that. any I'm dynamic following point, still across changes of It's you sure I I'm customer by this this at reports like cautious increases at with out have

Operator

Blair comment question line Oppenheimer. the next Our Bryan comes of from from or

open. is line Your

Bryan Blair

the $XX quarter ran Gabe set, $XX breakout cost as million or level? expected structural level million just to you the to of savings what's

Gabe Bruno

about looking fourth Yes, types structural exiting we're the savings so at in the quarter. when you $XX changes, of think million

so we'll in into impact year And real anniversary most a as have that. the that XXXX, half progress see you of the then we'll of first and

So think about to $XX trajectory million that XXXX. million $XX into

Bryan Blair

upcoming if the think I we should I segment meant quarters? clarified. modeling have by about

Gabe Bruno

our of been have three about side. quarters actions on the So structural Americas

So Americas I welding. international Welding a estimate would just quarter three quarters

Bryan Blair

more one, the was the little know could how And side. on spending And a interest then we higher engagements capital I hoping automation pandemics customer if color on level you offer a impacted was I longer term proposition pressured though. role for point this pretty would in automation and reasons. assume only much of across enhanced additives the obvious value board has your the that at been overall

on can Just comment you curious that.

Chris Mapes

that also Yes perspective either drivers associated productive pandemic Bryan, are automation able to environment a potential I cell look of for to requires of interactive some structural to associated XXXX, we'll aligned of allows we're most am a we're process on a share more work process, see the automation to to that improvements. of from reassuring our I those QX be business individuals pandemic. pandemic. into with into example an process the and associated many behaviors to fewer longer that term automation some amplified able that's that's some But dynamics our that of start we with equipment have know times actually be from individuals as our believe with on in challenges or seeing that migrating going whether complete activities developing technologies whether maybe new have new is ensure that is your that to automation collaborative the that expecting effectively. that side a is that installing probably business in engineering a of customers An all more the driving driving process you and But our our structural we be would high-profile and our with difficult And product. and of automation. and I have the

technology and their we believe technology excited develop globally that side, for webinar the can we in who industries provide webinar equipment interested that very to individuals actually we're be and but about So customers could applications. and that a particular on

customer engagement. still we create So can

Sometimes it's engagement for solutions automation pieces those of side, specific difficult are built because to customers. the create individualized that customer those on

really we the to occur that So, otherwise the would. some have opportunities. have We customer easily. see ability need but collaboration at still pace they that still to they're occurring not of We for are meetings occurring, that more

of So aligned would the structural I opportunity. of through easily able mitigate I to be with improvements some have like. automation impact the completely portion the rest for long-term of to the just as believe migrate inability as to to that we the in collaboration of need an the And us pandemic we

Operator

Our question Dobre of Baird. from from Mig or next line comment the comes

is open. line Your

Mig Dobre

Gabe, over decline wouldn't the your terms back you I of I comp Where that. is mind third wondering the quarter the in expectation going incentive on I'm comp for comp? your if full-year year-over-year? incentive in comments now And apologize what missed and was in incentive

Gabe Bruno

Yes.

was quarter million mentioned by third the fourth in we this and we do incentive anticipate million at year-over-year quarter about an $X.X Mig year-over-year down in So point. increase $X that the competent

Mig Dobre

where full-year do the amount? shake for out full you And the

Gabe Bruno

change. type $XX million to overall about $XX It's million

Mig Dobre

part the that aware incentive presuming how as we're $XX that. about? a of have be or what's need volume of million the savings sense these kind we looking to at year, call kind then you the temporary temporary of million anything be for to savings there XXXX, that's So of $XX think that else I'm Into comp it headwinds, or perhaps relationship might with is becoming this

Gabe Bruno

Yes.

the sure right. So we're savings make Mig comp incentive from the I just, mean Mig clear, is cost separate change temporary

sure when got right. you're about thinking So … to you've then make that And that

Mig Dobre

Okay.

Gabe Bruno

favorable into now first still impact pandemic we savings expect right environment on anticipating savings mentioned quarter. quarter. a in first then, the operate why do we we're that's continuing the temporary temporary So into to And this that

- then $XX about is So million. the rate and run

So temporary million last $X year's costs. about saved first quarter, we in type

will we about of first So That's be XXXX. your right year million anticipate quarter what $X now. during that

Mig Dobre

I I guess… that. appreciate

Gabe Bruno

pulled of that's the Yes, XXXX, the at and anniversaring back, that this cost we then Mig discussion the throughout as on savings any in impacts you have entering dynamics environment. then point second and volumes and temporary migrate in quarter we've

Mig Dobre

into Then I'm about I Okay. in and XX% I if certain the Product, margin may had segment. quarter where gears yet talk a little switch a see go bit a Harris and margins to you mean

what's I'm how forward, the talk here. quarter hear about way has, I'd pricing much cadence So a of then of been it presuming kind seems that margin to to pricing, But to to think love And that the just margin. of you it. the about hasn't contributor be unusual given about of if third sort right going

Chris Mapes

is you you team Mig, we our of in very had execution first or work tell would down, Chris, pieces fell the that four by Products quarter. break place strategic know I you wonderful Hi, the key just Harris that this three all quarter. actually quarter into I all But and all that in when I would tell the

and to that product home back strong very like activity demand were that in as first portfolios was that which consumers went very seen to their for into do bring their garage it strong the just Lincoln other yourself looking us. The retail, that for had channel, as relates it the and our actually consumer is we've of portfolio products channel

the where an second was back strong was products The we the then piece to also that have doing very on remodeling. business who all can that also guess about to that our by the what think heard a HVAC about our business in And saw come able I consumer of business talked business like though the our cycle. come well Harris a the still there in quarter. on improvements total Harris And business repair of operating Harris business time see on for in can allows it perform side. aggregate the to we've broader our Harris as business is that we really home the model about portions back we've Lincoln were in executed our period our margins we'd through at which HVAC of the for building piece long those the of that our plumbing Mig to that to And all solid. side products things that be is Electric and is

much the So I you kind tell of will XX% believe I stronger than it. sustainability don't what I expected had performance that that that was business from the as And business. current in our

about us. There you today have that that you solid movement so that least be the a strong Harris, profit at talk a very But component confident You performer for which believe going the over pricing, the believe in strong tell business in not we movement pricing. it just the will We strategies price we continue continuing within great was for impacts in to be I copper it's will and short-term. to silver business I'm performance. that know not us for operating the XX% year-over-year

Gabe Bruno

maybe Mig Yes, add… I to just

Mig Dobre

Understood.

Chris Mapes

few talking just is think maybe been we I still. mid-teens Mig as of So where trajectory are margins kind that on the we've in EBIT last at quarters,

Mig Dobre

you about understand Understood. think me good last also if I margin though And revenue here may do years to help. question, I for in you here? the be this Real margin able over revenue to and annual that question order Thank at restructuring double-digit generate then, is, in you've that. type of what given sort volume quite for international this point segment. of done rate that one run need amount I'm you the talking

Chris Mapes

last I had the as call, call. second quarter at Mig we spoke So

volume still baseline. increases we out believe XXXX that You we're some know anchored after

right think with track I in on we're progression business. our our So

You're volume double-digit business look we're XXXX that that to and EBIT type continued to changes get model in cost in opportunities increases still at right, will margin. we've sustainable us our some confident institute into our

Mig Dobre

keep see question luck. you if I to Good changes. so a asking the much. just Thank answer

Chris Mapes

Thanks, Mig.

Operator

Chris of comes from comment or Research. question Dankert next line the Longbow Mr. Our from

is line Your open.

Chris Dankert

that What I the are a in and if rationalization, in services with IT kind guess on standardization, of focusing timeframe Where what spent some but in of the investments bit? could those dig on a facility standard softer the higher on little the We of of XXXX. I we know we you shared suppose? lot time investments are kind the past the

Chris Mapes

host nice of the these of pandemic been Well, investments been because prior to to business within had we our I think making continue to business the a able in that and those. model, confidence in the thing the we've is invest long-term

foundational the CRM the a of implementation globally. that was of actually one So system of elements

ability we presented probably XX% information products user that change have our on the better basis. has new we that now would really our We're I with needed to the tell and tool. from a engage and game in global So there would customers and particular way of currently a bringing on way data experience we're front a to end to perspective. implemented our customer that been the experience. you We XX%,

to to been I very aggressively And about that continue really work an investment excited $XX the that's implement how that one have through shared to we're it'll is teams looking the We XXXX we within business. in we I driven other would are been that more the our our around a million the change but at world, products, very I'm services implementing $X on believe large leverage and starting with And of that user that want about QX that have people that. certainly business. early that's us it's one you we innings operational investments higher that the our learn we'll of of the but in those within for experience of year. particular tell And Lincoln excellence a for throughout investment more have the side, - then of productivity implementation learn of the people for one another strategy. about come in company. those working work, to of our solutions about long-term Electric, team probably there that process that objectives portion that be million side investment's the internally the we're across to an that's have standard

key advance handful said see XXXX, I a strategy starting make strategy. standard just those just well invest several within to continuing the of we migrating progress to So them execute areas as implementation, that four wanted it's but towards to we we're now. us into we're higher in to a Obviously, continuing

Chris Dankert

that third And but paid off with that year investment again, into sounded and you've does of of a for the the the quarter in quarter there. Would quarter, already in you then working the Europe second a strong into we've was, know quarter dig done here ago capital covered how inventory gain benefit to struggling that carry some specifically? international you actually share like in investment in just we over fourth it the film the was a kind say were

Chris Mapes

difficult know say to You for it's share that gain. a it's me

And We inventory decision. in Asia. a build that shown risks Lincoln that for we it still Southeast here that can working even our the to in inventory the decision to even to and improvement what higher to a of longer-term cautious, from associated a at operating QX can maybe in quarter You to we'll risks be though those make we've know We was I've traditionally of can I resilient is our than means, created over I We lead did we're supply which and in we shown uncertainty environment, as ratio And we that exit the the right capital that the need associated don't after the we support pretty work we within that challenges, probably slightly did to the believe that with support Electric's back have Americas. chain higher quarter over share operate COVID, business, we've want structural running share. us average we do. what seen said the we about at year sure than I customers. consistent our after because quarter to to today did and it we've global continue through business. though But relates perspective. strongly normally in But Europe. before And internally to think customers actually show really a quarter think level start do improvement that with need

that So created to saying that ensure that team slightly but exiting we're I'm can XXXX. frankly just are moving metrics as benefit, we're you tell a continue we're forward that inventory have probably XXXX can share do quite I moving that for But to ensure more service and going it's to uncomfortable we we reviewing into customer exceptional. that

Our best are our really to particular region to from they've the demand ever that expected the customers for ability been business. meet that across continue

Operator

Walt or Liptak Our comment next from Seaport. Mr. the from line question comes

is Your line open.

Walt Liptak

want I about of the recovery. Well ask cadence the to you

in the think talked past. you I this about

as you guys As guys we all you a industrial sectors. of touched know lot

revenue in Chris happening? this know - that's cadence V-shape looking And the of pretty about the stronger. how your You is are know tone it guess improvement? do you do So thinking probably to be about with thinking the you you you you're you recovery when upbeat. or Is coming you maybe know recovery seems the with you know monthly what I this at know are

Chris Mapes

you Yes, V-shaped them. to as they've difficult associated out. then to Walt the in current my recovery. it a occur, me relates They've acceleration when it's for and choppiness me with tells the got as certainty recovery speed experience And less identify the that the got know more past those

very you in a COVID gas which oil beyond V, also business Now not there's think are the materially like normally what the you've fact that and and to with with some we got but in see it, no show the went a V-shaped industry see I associated that obviously start associated this inside like much cautiousness challenges which of the with then question down some the associated that is We've challenges greater outside channel of expected. heavy retail And of recovery. our business change than us any the piece seen pandemic. yet the really of

to know a you that risks be rate saw prior I the at QX into going as with me QX demand. about exiting be we're and closer we're talking migrating to as about not you levels also associated run the that So of for still to with able accomplish would as recovery we as being identify be we're in this should we to XXXX probably year we're expecting tell V-shaped more to than

identify in So solid but space a recovery expecting a it the don't like probably recovery. recovery, as I continuing industrial V

Walt Liptak

presentation, over broke appreciate the think the equipment. we equipment? In can guys the and know versus in wonder I comments the broke you And the between consumables you go if out you then you consumables Chris. out I seeing I and again that what differences are

Gabe Bruno

some mute I It's of key between just to things. the that, re-emphasize made the Well here. quarters sorry so [indiscernible] about

continued quarters, have single good core mid and business that in and seen our we continued percent range digit has that over So right. to equipment progression

introduced pleased So had a portfolio, simply a But we've automation still going bit wise of in positioning this know continued to single side at look as see committing is while seeing there. unusual. bit cycles really you how product our we equipment then we Consumables little the we're factory has product percent, positioning And lagged while new that's with different you capital. which note and to high in progress pretty re-engage. automation, sales the start know hesitation we're you digit that our

our automation six-month So also softer - to the see our the fourth commitment to expect and follows trajectory in add and in in of would that pace orders. we And continue a that change some we automation of auto start automation to month a until would overall into mind capital to keep lag business. to quarter three

progressed lines. the of big product we've how and kind view that's picture So

Walt Liptak

Okay. Thanks for that.

OEs lagging, there's could are reluctant distribution and more that inventory the sold that's the the to that channel seeing inventory them through slower add and On is where to the that refresh? the direct those consumables consumables reopening you're

Chris Mapes

when drive heavy know But from are some got, both direct consumable's the you've those channel also a got gas Chris segments it's the challenges down, is are seen relationships. when our a of this perspective. you distribution Obviously relationships well, in some in we've those it's bit Yes, segment, oil that industry consumables, also baskets. you've in and of both, good

it's targeted towards broader don't not necessarily than segment only one - I So believe I'm or it's only that. channel, one

Operator

next Stanley. of or comes from [Operator Dillon the from Instructions] Our question line Cummings Morgan comment

Your line open. is

Dillon Cumming

a the off that sustainable the local transportation extension infrastructure better the of guess of we're into like kind that working some business over you've on is special of you're some of given on fast larger seeing that rest heading holding things of market of curious I clearly seeing of the kind business. pressure given there been it's backdrop. is what of But bill. on budgets next track state there, the and and recovery year? in the Couple Do questions kind broader you of When feel end kind the

Chris Mapes

there to the Well, some exceptional the in of as I stated certainly of job outcome that an element Harris consumer I of that executing relative pandemic. for was an of think team Harris that the an demand behavior did QX. the There's

area so, piece I'm not certainly a not some that for that We of the that industry. Harris and demand The we've QX. that to the alloy know demand in the business comfortable that comes feel HVAC that actually support And was level in that's better products and that that them though profile we the new that that next channel, it not replicate of will itself in strategic driver expect rest be at still what this QX products brazing would some making for saying demand really been side broad for be year. probably time from would we some sure investments but

exiting into that show be the I the day, perform end to so solid year say year. very next growth the don't continue at So levels able quite demand should know we're XXXX, I that moving into we're the But of to those that Harris performance. can business and of frankly will kind moving at as

Dillon Cumming

And energy. then to wrap maybe it on up

kind that opportunities then you new same the your either guess of some level you that decline in the actually the early three past quarters. it's the terms And or I a stages we're extended of multiyear versus haven't that is think you downturn not rest structural of operated the in downturn. historically of of helped business? early kind new business of over comment Are more kind offset of of of portfolio guys I in lines - demand there product kind seeing made headwinds really seeing any in the geographies

Chris Mapes

they did Well kind of and just that a tell to reinforce bit.

acceleration an the in in see did particularly we of gas weakness and know side. You energy oil

So we with XXs really that trajectory going of just short-term that's that nothing to oil change in can and south particularly that. low the price see there's of

to continued going to environment. challenged So be a be that's

example and Now strong for wind. seeing within that in are renewables and we good a positive momentum

positive to general to in we of and we a continue see our do of gas acceleration there markets know and continue saw component in smaller But overall trend. into XXXX. but there. we in we We the we of good oil see that that in we the expect into we see that acceleration expect know weak. markets We seeing third that XXXX. an that oil and that industry the third the And energy into see quarter we quarter weak. quarter an gas are did we'll as to continue segment, XXXX, and and expect in that but is So is did It's it general the as positive

Operator

next comment Mr. from Jones Nathan Stifel. is or Our from question follow-up a

open. Your line is

Nathan Jones

looking on cadence through for a the color just I'm the little quarter. more bit

and X.X%. from were order teens the improved had the rates said had level. guys came only had previously Organic that disclosed down in You order high revenue August rates July about in down

how Can And So normal worse? little a wondering bit release moderated due just call did strong that's was? little seasonality September line then press order you talk had about in October seasonality. you that the I'm a better, in to slightly whether or rate bit out with

Chris Mapes

to big a Nathan, me quarter. give first picture the try so just on let you Yes, third

July being did we in order mentioned trends you the discuss high as So teens.

any provide We nice improving. see color step change August a did except we pretty While and it on stuck. in is didn't it August

no difference overall activity level meaningful August also between So September. business in into August trajectory the of in the of continuation the with we saw September progressed and

there's what quarter choppiness enter to be of our can commensurate seasonality that there's our Now imagine on as with overall third organic to we normal I we sales at of we lot I the fourth and could as business quarter, a based mix this saw otherwise is what we seasonality evolve. in We're mean, pretty normal that see trajectory what you in we the expect. confident see. would but and business said, point mean, that

I'm in mind third quarter then quarter keep in is in there would one more year-over-year, I fourth workday And Now thing workday the less also one in year-over-year. the one quarter was that - than add sorry. the Nathan there to third the is

that fourth we So quarter kind with at organic business sales - of see it's would what level we be but what on in we in based expect the normal see. third would that with point our quarters this seasonality, commensurate that

Nathan Jones

and in should saying revenue adjust you're we the to XQ extra in XQ about improve for less day continuing XQ numbers kind XQ the If organic the underlying one day of is right, that sales, So same. that then versus be those roughly the implies XQ? daily

Chris Mapes

the say quarter. mean say Nathan But holding a we I way they overall about long if at go steady would steady. thinking holding would right got steady. I just hold still think we're this in I to point we're now,

Operator

from Markets. comment Our next of question from or the Barger line comes KeyBanc Capital Steve

line open. Your is

Steve Barger

XQ going year. Thanks a call ask far. next on so question I'm to similar for the color around good all the

another negative is quarter that year-over-year enough XQ of that weak seeing you're end growth or XQ challenge XXXX in revenue you think of got - a XQ, the comp, mean revenue some can markets XXXX how up negative do trend markets X.X% to sorry? be relative You've and of

Chris Mapes

get And that's it's kind great just to for that hard us a really tell visibility. I'd you Steve, question. of

we'll quite business going rest can for then, And this about is quite a quite concerned OEM to of move QX. of global moderate - in can migrate a QX. or whether through see half actually at decided be push that think well. may think I going do maybe very doing basis It some model. they're mean I the in they're of on what now. difficult frankly the demand to COVID still our a to I large just not QX reemergence work, And QX. into mean and I sometime portion bit that the frankly favorable, first that could that of we can Because see the the move accomplish QX frankly maybe that we we inventory demand other cost. right that in mean we're way. us little business they've

to I that QX very saying in tipping the in think accomplish globally. that be continue see as versus that uncomfortable we'll the we able close whether business we're point QX improvements to So probably to

Steve Barger

Understood.

of I And peak you was cadence I the more question so XQ I from to kind guess and where revenue that kind flatter to say do end XQ. to next going just slightly but just goes the like of a meaning expect know in XQ part up to normal normal returning trending sequentially it the of depends seems thinking a to fair? markets cadence. you about, that visibility that cadence talked Is that you you're of some start on have that enough

Chris Mapes

that becoming variables XXXX. larger say why will to cadence. that we've first challenges impact. the we that half other that fair think I'd the recognize a as see migrate can we able Then quite of in level that's got COVID issues yes, other barring some in I it we see or the to And any as we confidence believing of is those one reemergence with frankly say Look long back that shouldn't of associated be to

Steve Barger

in basis mean expect on I'm than it sorry Americas, And international if but year-over-year should than that mix a down obviously given more in more talked we I XQ segment lot the you've to this, I missed the so? about was be down a XQ.

Chris Mapes

you level of it's but a - tell me that. mix leads on there, segment things, There inside a is to that I Steve. would of which a couple sure Yes,

is forget business not to business. from that it relates that other been the COVID has international recovery trailing Americas let's the as The thing also

would although expecting would Americas expect I improvements am that QX. So in QX to from business that our continue, I

Steve Barger

and flow see cash - XXXX in of or then this me. flow year? positive one would and inversion cash flow we cash last expect about you talk that prior to takes of year. improve cost swings Gabe, the just from when then conversion restructuring Is puts free is the And to cash free the year-to-date can free down versus of of

Gabe Bruno

position really so is in cash Yes, Steve, flow changes overall the by sales, right. overall free driven

have, intentionally inventories. do investments So increase we around some

on the it's the timing a decreases structural the changes different truly but not actions. and have on receivables, of as increases that, than You nothing impacts mentioned rationalization some impact of you significant

as spend see But then an by of that on would changes So truly expect increasing capital. working and sales I it also is investment to a top-line level the capital. driven see driver. wouldn't We profile and Steve

initiatives new you very were in - increased that also expect I capital saw but executing plants. third product be within and on spending challenged the this focused to a projects, introductions you would we're on our and productivity we're we So - quarter. But some from saw past bit much what

Steve Barger

XXXX? Is that comments for

Gabe Bruno

- into XXXX. Yes

Steve Barger

build next have you well. you if year And a increase presumably as then working would capital top-line have

think things So to flow? those as both we free cash should factors about

Gabe Bruno

Yes, conservative conservative although you know pandemic. to continue we'll in our as as been know migrating we've positioning you in in we've and capital this be talked, working our positioning we're through

Operator

question last comment Dankert line the from or Research. Our Chris Longbow from of comes

Your line is open.

Chris Dankert

the looking for the kind We're Thanks since official there program any year additive there orders wins on of for in just anything comment the a development beta in either additives? highlight of of that first ahead to launch in the or manufacturing technology Is terms program. follow-up. first

Chris Mapes

Yes, this is Chris.

automation very customer very business, our excited challenged. But a our The more last looking little the one engagement. you drive implementing technology months been that we're component a strategy to As be we're bit with might that for new individual much expect from like new to it's have and would additive we and perspective a has being do what few ability about.

decided to at interest centers their at And universities that going should centers talking out their do and placing know individuals going technology. we're how start the the other We're this this providing to business them with utilized because are these other within So in Ridge of that that practice. as doing associated challenges to the well those OEMs Oak systems like those global to is to around in the environment. what Labs looking R&D an technology large have we placing And some R&D we the R&D we've as more in OEMs can that be and in current believe some be with COVID R&D world. labs. allow familiar labs We the will see of of technology able to become

that. about excited I'm So

advance key some has additive incubating the and We certainly will at we recognize business we're across the business. it the like to I challenges long-term. industries ways key to new And and looking technologies COVID that created who particular think OEMs are last that this utilize still continue I mentioned several still as for business months.

Operator

call and back over Ladies Bruno I for remarks. turn our concludes Gabe session. would closing to gentlemen, to this the Mr. like question-and-answer

Gabe Bruno

Thank in for initiatives cost everyone in progression continued on look joining of for Electric. Thank like us Lincoln discussing would much. the the our forward We thank today you. to programs interest to call your I strategic and very and reduction future. you the

Operator

the thank gentlemen, participating in for program. This and you conference. Ladies today's concludes

disconnect. wonderful Everyone day. You may now a have

Lincoln Electric (LECO) 27 Oct 202020 Q3 Earnings call transcript