Greetings and welcome to the Lincoln Electric 2025 First Quarter Financial Results Conference Call. All lines have been placed on mute and this call is being recorded. This is my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you. You may begin.

Thank you, Celine, and good morning, everyone. Welcome to Lincoln Electric's First Quarter 2025 Conference Call. We released our financial results earlier today, and you can find our release and this call's slide presentation at linconelectric.com in the Investor Relations section. Joining me on the call today is Steve Hedlund, Chairman, President, and Chief Executive Officer, as well as Gabe Bruno, our Chief Financial Officer. Following our prepared remarks, we're happy to take your questions. Before we start our discussion, though, please note that certain statements made during this call may be forward-looking, and actual results may differ materially from our expectations due to a number of risk factors and uncertainties, which are provided in our press release and in our SEC filings on Forms 10-K and 10-Q. In addition, we discuss financial measures that do not conform to U.S. GAAP, and a reconciliation of non-GAAP measures to the most comparable GAAP measure is found in the financial statements in our earnings release, which again is available in the Investor Relations section of our website at LincolnElectric.com. And with that, I'll turn the call over to Steve Hedlund. Steve.

Thank you, Amanda. Good morning, everyone. Turning to slide three, we reported solid execution in the first quarter despite a softer industrial cycle. We are well positioned to manage evolving market conditions while still investing in long-term growth, advancing our strategic operational initiatives, which are focused on driving margin improvement, and increasing our returns to shareholders. Looking at our first quarter highlights, Topps line sales increased on benefits from acquisition and price, while volumes were a bit softer than we expected. Half of the volume decline was due to labor negotiations in our Turkey facility, which impacted sales. We successfully concluded negotiations mid-March and orders started to normalize in April. Our first quarter price included our initial response to announce tariffs, and we have since implemented additional pricing. Together, these actions are expected to yield mid-single-digit percent higher price in the second quarter, and we are prepared to take further pricing actions if other tariffs come into effect. The team did a great job maintaining diligent cost management and generated an incremental $16 million from our saving actions in the quarter. Our adjusted operating income margin declined by 60 basis points to 16.9%. Acquisitions, which we are still integrating, and the impact from Turkey had an unfavorable 110 basis point impact to our adjusted operating income margin. Our adjusted earnings per share of $2.16 was slightly lower than expected, but included a five-cent headwind from the combination of Turkey and unfavorable foreign exchange. ROIC remained top quartile at 21.5% and we generated record cash flows with a 130% cash conversion ratio. We returned $150 million to shareholders through our higher dividend and share repurchases. In this period of uncertainty, we are staying agile and are working diligently to serve customers with our innovative solutions while leveraging our global supply chain to minimize costs wherever possible. We are continuing our savings actions until we have better confidence in improving fundamentals in demand. We continue to expect to generate an incremental $15 to $20 million in year-over-year savings in the second quarter, and we expect some easing in our savings rate in the third quarter as we anniversary the program, but are committed to limiting discretionary spending until volume performance improves. We have also decided to temporarily suspend merit increases, which are normally implemented April 1st. This delays an increase in employee cost of approximately $5 million per quarter until we better understand customer demand trends as trade policies evolve. While a difficult decision, we felt this was the prudent position to take in the near term. Turning to slide four, reported organic sales declined 1.2% in the quarter, which includes a 190 basis point unfavorable impact from Turkey. We continued to see better resilience in consumable organic sales as customer order rates improved through the quarter. Automation's organic sales remained steady year-over-year as double-digit international growth was offset by ongoing compression in the American region this quarter. Long lead-time automotive projects and energy were sources of growth for automation, while all other end markets continued to compress as customers defer capital spending. Automation reported sales increased mid-single-digit percent to $215 million. The automation team continues to see strong quoting activity as customers hedge different investment scenarios, but order rates and backlog have not yet normalized, which puts what is normally a seasonally strong back half of the year at risk. Looking at end-sector direct channel sales trends across the company, we were pleased to see that four of our five end markets achieved organic sales growth. This was led by global growth in both non-residential construction infrastructure applications and in automotive. General Industries also improved momentum in HVAC within the Harris Products Group and in International due to select automation projects. Heavy industries remains challenged, and we expect this trend through year-end until production activity normalizes in the agricultural sector. Our domestic rental and industrial distribution channels, which predominantly serve commercial and light industrial solutions, also performed well as compared to industrial demand. To conclude, before passing the call to Gabe, while this is a more dynamic environment to navigate, we are continuing to prioritize our customers, are implementing short-term actions to mitigate inflation, and are progressing towards our higher standard strategic targets. We are focused on executing what we can control and staying agile to adapt quickly to evolving conditions. Our strong balance sheet, ample levels of liquidity, and confidence in cash generation allows us to pursue our capital allocation strategy through the cycle to continue to compound earnings and position ourselves for superior returns once growth returns. I will now pass the call to Gabe Brino to cover first quarter financials in more detail.

Thank you, Steve. Moving to slide five, our first quarter sales increased approximately 2.4% to $1 billion, $4 million, from a 4.9% benefit from acquisitions and 2.6% from higher prices. These increases were partially offset by 130 basis points from unfavorable foreign exchange translation and 3.8% lower volumes. Turkey had a 200 basis point unfavorable impact to net sales. Gross profit dollars declined by approximately 1% to $365 million as a $4 million benefit from our savings actions, as well as benefits from cost management and operational initiatives were offset by the impact of lower volumes, Turkey, acquisitions, and an approximate $2 million LIFO charge in the quarter. Our gross profit margin declined 110 basis points to 36.4% versus the prior year's record results. Acquisitions and Turkey combined had a 90 basis point unfavorable impact to gross profit margin results. Our SG&A expense decreased 1% as $11 million of expense from acquisitions was offset by approximately $12 million of savings benefits and $6 million of favorable foreign exchange. SG&A as a percent of sales improved 60 basis points to 19.5% of sales. For analysts closely following our EBIT schedule, we reported corporate expense of approximately $1.7 million, which was substantially lower than prior year. The decline was primarily due to a lower level of accelerated stock compensation and equity awards, as well as an update to corporate allocations in mid-2024, which decreases the distribution of corporate costs to reportable segments. This lowered corporate expense by approximately $4 million in the quarter. Looking ahead, we expect corporate expense of approximately $2 to $3 million per quarter for the balance of the year. Reported operating income held relatively steady versus prior year. Excluding special items, adjusted operating income declined 1% to $160 million with an adjusted operating income margin of 16.9%, 60 basis points lower than prior year. As Steve mentioned, Turkey and acquisitions had a combined unfavorable impact of 110 basis points to margin. We reported first quarter diluted earnings per share of $2.10, or $2.16 on an adjusted basis. We incurred a $0.05 headwind TPS this quarter from the combined impact of Turkey and unfavorable foreign exchange. Moving to our reportable segments on slide 6. America's welding sales increased approximately 5% in the quarter, driven by a nearly 8% contribution from acquisitions and 2% higher prices. These increases were partially offset set by 4% lower volumes and 1% unfavorable foreign exchange. Pricing reflects benefits of prior 2024 pricing actions, which anniversaried at the end of the first quarter, and new first quarter pricing implemented to address rising material costs and tariffs. As Steve mentioned, we have also announced additional pricing in the second quarter, including surcharges, to mitigate the impact of the announced tariffs. We will continue to monitor the dynamic situation and respond as trade policies evolve. First quarter volume softness reflected customers' cautious capital investment spending, with automation representing just under half of the decline due to soft second-half 2024 order rates, which we've previously discussed. Consumable demand was relatively steady as order rates improved progressively through the quarter. This was most notable in our industrial distribution channel and in non-residential construction and energy. We expect acquisition contributions to narrow starting in the second quarter, reflecting the April 1st anniversary of the Red Viking acquisition. Van Aire will then anniversary on August 1st. America's welding segment's first quarter adjusted EAPA decreased approximately 9% to $124 million. dollars. The adjusted EBIT margin declined 260 basis points to 18.2 percent early due to the impact of lower volumes as well as an 80 basis point unfavorable impact from acquisitions and a 40 basis point impact from the higher allocation of corporate expenses. These factors offset the benefits of cost management and our savings actions. We expect America's welding to continue to operate in their 17 to 19 percent EBIT margin target for the remainder of the year moving to slide 7 the international welding segment sales declined approximately 7% primarily due to 6% lower volumes excluding the impact of Turkey international welding volumes would have increased 3% on strong volume growth in Asia Pacific and a modest decline in EMEA the overall improved demand was seen across four or five end markets, excluding heavy industries. Adjusted EBIT decreased approximately 17% to $23 million. Margin declined 120 basis points to 10.2%, which includes a 30 basis point unfavorable impact from corporate allocations and 140 basis point compression from Turkey. We expect international welding's margin performance to improve sequentially and should be within 11 to 12 percent for the balance of the year. Moving to the Harris Products Group on slide 8. First quarter sales increased 9 percent with a 9.5 percent higher price and 60 basis points of higher volumes. Price increased on metal costs and volume growth reflected ongoing strength in the HVAC industry, which was partially offset by softer retail trends. Adjusted EBIT increased approximately 22 percent to $24 million and margin improved 190 basis points to 17.9 percent. Improved profitability reflects effective cost management and strategic initiatives in the segment. We expect the Harris segment to operate in the 17 to 18% margin range for the full year 2025. Moving to slide nine, we generated a record $186 million in cash flows from operations in the quarter, resulting in a 130% cash conversion ratio. Average operating working capital improved 100 basis points to 17.8% versus the comparable prior year period due to continued improvement in operating disciplines in the business and timing. Moving to slide 10, we invested $27 million in CapEx, and cash returns to shareholders were strong at $150 million in the quarter through a higher dividend payout and approximately $107 million of share repurchases. We maintained a solid adjusted return on invested capital of 21.5%. Moving to slide 11 to discuss our operating assumptions for 2025. We have adjusted our full-year framework to incorporate U.S. tariffs enacted through April. At this early stage in the year, we are assuming our full-year 2025 organic sales will be relatively flat year-over-year, which is consistent with our prior position. However, we have updated the drivers. To maintain a neutral price-cost position on enacted tariffs, we have estimated our full-year consolidated price will be in the mid-single-digit percent range, as compared with our original estimate of 50 to 100 basis points. We are assuming that higher prices and the possibility of incremental tariffs in the months ahead will lead to lower volumes. We are expecting to see this starting in the second quarter. Our framework assumes that we are able to substantially mitigate the impact of enacted tariffs and mid-single-digit percent lower volumes through a combination of price, supply chain, and operational initiatives in our savings actions, which is in line with our track record. This would result in a full-year adjusted operating income margin that is flat to down 50 basis points versus a prior year at a high teens percent, decremental margin. While April demand has been relatively steady sequentially, this stability may not reflect improved fundamentals nor the impact of all of our pricing actions. We also recognize that evolving trade policies and tariffs will continue to shape market conditions and uncertainty in the quarters ahead, which could prompt customers to further defer capital spending and lower production levels until conditions stabilize. We will monitor trade and demand conditions as the year progresses and aggressively manage conditions as warranted. Looking further down the income statement, we now expect a contribution of approximately $1 million in other income per quarter from a recent equity investment. While we are continuing to pursue M&A, the sluggish deal environment in our own valuation favors an elevated level of opportunistic share repurchases. We are now estimating our full year 2025 share repurchases to be in the range of $300 to $400 million. We are maintaining our other assumptions on interest expense, tax, capex, and cash conversion. And now I would like to turn the call over for questions.

Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question during this time, I think you press start followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the found key. To ensure that everyone has an opportunity to participate, you ask one question and one follow-up question only, and then return to the queue. Your first question comes from the line of Sarie Borodski with Jeffries. Please go ahead.

Yeah, Maureen, and thanks for taking the question. You talked about growth in all markets, excluding heavy industries. I believe that includes price. Can you just talk through what you saw from those end markets on a volume basis and then how you're thinking about that for the remainder of the year?

Yeah, just to give you some clarity, Tariq, while the four out of the five end markets were stronger than they had been, And we do have an unclear picture as the year progresses, as you can appreciate. You know, as we've talked in the past, construction and infrastructure, while it was up mid to high single digits, pretty choppy. So we've got good momentum there, but depending on where we see activity levels, we'll progress in how we view that part of the market. Smaller part of our business, as you know, it's about 13% of our overall sales. Automotive, general industries were positive. We were good to see that they're up mid-single digit. When you see the mix of our business and general industries, we did see strength in the consumable side of our business, and we saw that not only in the international markets but also in the U.S. We did have some strength on the HVAC, as we've mentioned. And so while we had positive trends there, again, pretty difficult to assert whether or not that momentum will continue in the balance of the year. And that's why our cautious position on volume activity. On automotive, you know, as we've mentioned, we were up mid-single digit. And while we were trending favorable on the capital side, automation as well as standard equipment, consumables were down mid-single digit. That reflects production activity, and as you know, there's some caution on where production activity goes across the automotive industry, but we'll continue to monitor that. The comps on the automation side, as you know, were easier, and we're looking to see quotes to translate it to orders as we've commented on how that impacts us for the second half of the year. Lastly, I'd just comment on heavy industries. Heavy industries down high teens, you know, that's the same progression that we've noted throughout the last year. Ag continues to be the most challenged. We are seeing some positive reports on the de-stocking, but we're still cautious as we progress throughout the year, and we've positioned our expectation to see softening production levels to the balance of the year. I should comment lastly on energy. Energy was up low single digits. As we've talked, we're bullish on oil and gas, but there were some tough comparisons beginning part of 2024, and we do see easier comps in the back half. So that's kind of an outlook that we would have. A lot of uncertainty, as you know, which is dependent upon how the end markets progress on production level, as well as decisions on capital investment.

So, Reed, just to add, as you look at the consumable demand in the first quarter, I think the question on everybody's mind is how much of that reflects pre-buy activities by our customers. And through both our analysis of demand trends and conversations with many of our large customers, the feedback is they're not pre-buying. There may be some opportunistic purchases here and there, but in general, our customers are very reluctant to get stuck with inventory they don't need, given the uncertainty of demand in the future. So while there may be a little bit of pre-buying in the first quarter numbers and in the April quarter trends, we don't believe it's significant.

You may be my next question, so I appreciate that. I'll add one more just kind of high level. You mentioned customers deferring capital spending a couple times in the career marks, impacting automation demand. Can you just provide some color on just what you're hearing from customers, you know, and what they're really looking to see to start resuming some of those projects? Thank you.

Yeah, Sari, as we commented, we continue to see a lot of quotation activities. So a lot of customers trying to figure out how they're going to respond to the shifting trade policies. And I believe long-term, there will be a lot of good growth opportunity for us as a result of that. It's the near term where, given the uncertainty of where the trade policies are finally going to shake out, the general uncertainty over macroeconomic conditions, impact on demand and the like, the customers are just taking a little longer to make decisions than we would like to see.

And I would just add, Sheree, when you translate a pause in the decision-making on capital investment, we can see up to another quarter, and that's the risk that we see in the second half of the year. So we have been pointing to, if you recall, throughout the second half of last year of softening order trends that would impact the first half of this year. And so we're more cautious because of the pause in making capital investment decisions on what it means to our second half. And that's why we posture our dialogue on volumes to be offset with the pricing impacts that we've announced.

Your next question comes from the line with Brian Blair with Oppenheimer. Please go ahead.

I just wanted to level set on announced pricing. uh what in terms of the mid single digit incremental uh pricing what is the split between direct price and surcharges and then um if you're willing to share what was price cost in q1 and given the moving parts and you know timing of those moving parts at hand how's your team thinking about price cost impact in q2 and throughout 2h to net to the roughly neutral

full year level. Yeah, so Brian, on the price costs, we're essentially flattish in the first quarter, and you know that is our strategy to be price-cost neutral. We're not disclosing the split between surcharges and absolute price changes, but we're looking at that balance to be able to respond to tariffs. So you can see a mix of that being just more traditional pricing that's reflective of inflationary pressures and then the surcharge to tie into some of the tariff

actions okay understood and maybe offer quick updates on red viking and then our integration red viking obviously you know owned for around a year now i'm just curious how those deals are progressing relative to you know plan the impact of the operating environments and just overall macro uncertainty on that progression, and then any quick comments you could offer on the deal pipeline and how this unique backdrop is affecting the development of the pipeline, actionability, et cetera. Thank you.

Yeah, so generally, Brian, the integration work on both Red Viking and Van Aire are doing great. They're right on schedule. We've deployed new systems at Red Viking. We've integrated them within our Lincoln business system, that's progressing nicely. The Van Aire strategy is also driven by growth and that, so that's also progressing right on schedule. But just keep in mind that the first three years of any integration, the results are expected to be diluted to the overall business. So it's running right on track. The Red Viking business is a little bit more choppy because of the project level of activity. For example, fourth quarter was pretty strong, and yet first quarter, while we had incremental sales contributions, we did have some margin pressure on the red biking side of things. So we're very pleased with the progression of both businesses, and they're very much on schedule. The pipeline, you've heard our comments around a sluggish environment. We have, as you know, a very active pipeline, but we do anticipate some slowness in being able to complete deals, and that's why we pressed on our dialogue around share repurchases as we think about capital allocation.

Your next question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead.

Thanks for taking my question. This is actually Stefan Diaz sitting in for Angel. I was wondering if you could just speak to your America's margin performance for the quarter. I know in the slides you mentioned, you know, impact of lower volumes and acquisitions and then, you know, also that corporate reallocation. But maybe if you could also, you know, quickly you expect kind of the integration of InAir and Red Viking. I know you just mentioned maybe some margin impact this quarter, but maybe like how quickly do you expect the integration of those two?

Yeah, so Stefan, thanks for that question. So in general, as I just mentioned on acquisitions, we look to up to three years to get to our normalized margins. So both Van Aire and Red Viking are progressing on schedule. A little bit more choppiness from Red Viking and more accelerated growth on the Van Aire side is what we expect. In terms of the margins for the Americas, you know, we've talked about the impact of acquisitions being diluted impact of 80 basis points kind of resetting corporate allocations decrease the EBIT margins for America's at 40 basis points but the larger driver is volumes and on behalf of that we noted that was in the automation side of our business so we're looking at mid to high single digit types of decline in growth in this in the first quarter in America's overall stable in automation, but the other offset is in the strength on the international side. So we do expect on Americas, though, to stay within our target range of 17% to 19%, and you can see that's how we ended the first quarter. But those are the drivers. We'll need to see progression around automation orders to have more confidence that volumes will improve in the second half of the year.

Thanks. That's really helpful. Maybe just sticking with automation, you know, given all the uncertainty and maybe the reluctance of capital spending, particularly in expecting that business this year? Because I know you were –

So I would say the core of our business, all the fundamentals are there to achieve our long-term targets. But this year, I don't expect us to hit the billion based on everything that we see now. So the order patterns and the trends around capital investment are going to put a lot of pressure on our automation business. But I'm pretty excited about how the business is positioned in long term. When you just take the core business and the acquisitions we've completed on a normalized basis, we're exceeding the $1 billion objective.

Yes, Stephan, it really comes back to the comments we made about customers delaying decision making. So given the mix of our business in terms of project lifecycle, we need to be getting orders in this part of the quarter and the second quarter to have greater confidence in the third and fourth quarter of this year. And what we've seen so far gives us an indication that customers are still delaying decision-making, which puts the back half at risk for it.

And your next question comes from the name of Steve Parker with T-Bank Capital Markets.

please go ahead. Good morning, everyone. This is actually Christian Zyla on for Steve Barger. Thank you for taking the questions. First question on automation and robotics, solid performance on a tough comp. Given your prepared remarks, has your visibility improved or changed since 4Q, especially in the auto end market? And I know it's fresh, but is there any indication that the stack care for LEAF helps your outlook or your customer's outlook on automotive-related

automation? If you just clarify your first question, the second one is pretty easy, right? I mean, it's a very, very fluid dynamic environment. The administration's policy around double stacking of tariffs, I think, just occurred yesterday. So it's a little bit too early to

see any impact of that. I understand. And I guess the question was, has visibility changed in the automotive related automation segment just given, you know, from 4Q to 1Q, has any

visibility changed? No, I think, Christian, when you're referring to our longer lead time parts of our business, we would comment that the four-way portion of our business, we had good activity into this first quarter. So that gives us some positive indication of some decisions on the longer 2026, 2027 program years. And that drove some of the automotive strength in the first quarter. But I think it's important for us to really monitor, as Steve mentions, you know, how the automotive industry then positions a response to tariffs.

So we'll stay very close to that. Got it, understood. And then second question, if we go back to early 2018, Euro-America segment had solid margin expansion from tariff-related price increases and surcharges, but then contracted in 2019 because of broader industrial weakness and volume declines. So the question is, if we fast forward to today, Do you expect a similar playbook, and do you see opportunities in America's margin longer term, given we started this time at lower volumes, or are you anticipating a lower leg down in volumes?

No, I think the longer term picture for America's margins are to continue to improve. I mean, you know that we've operated above the range. We need to see more contribution volumes from our automation business, but our Americas EBIT is solid, and the acquisition contributions will improve over time, as well as volumes. So we're well positioned to continue to improve the EBIT profile for Americas.

Your next question comes from the line of Meet Dobry with Beard. Please go ahead.

All right. I must admit, I am a little bit confused with all the moving pieces here. So I just want to make sure that I understand this clearly, because when you're talking about Q1, right, four out of five in markets reported growth. Then you mentioned that at least in April, what you've seen is demand was stable sequentially. Yet your commentary points to uncertainty about the back half of the year. So I'm sort of trying to understand here, is it a function of automation primarily and the backlog sort of depletion and the push-outs that you're seeing there that gives you this sort of more cautious tone about the back half? Or is it that you're sort of saying, yeah, there's that, but there's also maybe the consumables business that has been steady that could potentially deteriorate as customer production levels yet take another step down in the back half. So maybe we can parse this out. That would be helpful to me at least.

At a high level, there are two things that give us concern over the second half of the year. The first and the easy one to understand is automation. Right. As customers continue to delay decision making, that puts the revenue recognition in the second half of the year at risk for projects that we're hoping they will award soon that we can start working on, recognize the revenue under percent complete accounting. But if they don't award it, we can't start. We can't recognize the revenue. Right. So that's pretty straightforward. The core part of our business, what we're seeing so far is that as we take price in response to material inflation and tariffs, there's an offset in volume. And we're assuming for second quarter that the price volume offset is effectively neutral. As we have to take further pricing actions, depending on how all the Liberation Day tariff announcements get resolved, there's a concern that as that price gets further elevated, there might be a more demand-elastic response from a volume standpoint. And then you've got the general uncertainty in macroeconomic conditions. You see falling consumer confidence, PMIs, et cetera. So it just makes us very cautious about the back half of the year based on what we can see at this particular point in time.

Okay, that's helpful. And I think it would also be useful to talk a little bit about where your business is experiencing cost headwinds from tariffs. is it is it certain countries where you're sourcing components is it primarily in equipment anything on a consumable side and I ask really because as this tariff picture continues to evolve from a policy standpoint it'd be helpful to know if certain deals are reached with certain countries or whatnot if if that would have a more immediate or direct effect on on your cost

cost structure as well so I would make emphasize that yeah we have pressure on steel you have some on components some on accessories we have about just less than 20% of our overall cogs that are exposed to where we believe tariff actions have an impact you have a mix between when the sourcing from Mexico Canada, China, me, and the rest of the world, but that's what drives the visibility that we have in responding with a mid-single-digit average price impact. So it's simply understanding the supply chains and the exposures of risk, and it's broad-based, but there are definitely areas that we're working through with components and accessories, particularly within the supply chain to mitigate uh but that's kind of how we think about it big picture wise your next question

comes from the line of nathan jones with stephen please go ahead yeah thanks good morning this is

adam farley on for nathan i wanted to clarify the price costs um discussion um historically you passed through uh cost to customers with a margin i know this environment is very different um but Are you looking to drive margin with your price increases?

Adam, we're maintaining our same posture that we've had historically, and that's price-cost neutral. And we'll continue with that posture in the markets.

Yeah, Adam, our goal is to manage and maintain and defend the profitability of the business through a combination of pricing, productivity actions in our factories, the cost savings initiatives that we've taken, and really being aggressive on trying to find alternative sources of supply that aren't subject to tariffs or subject to lower tariffs. So it's a combination of all those effects that lead us to have an objective of trying to maintain the even margin of the business to flat to down 50 basis points. Okay, that does make sense.

um that's understandable you know i i guess if if the tariff picture does hypothetically improve from here um would you look to to maybe hold on to pricing gains or again with the tariff environment it's easy to point to what the cost increases are um you know should we maybe assume maybe a lag on the way down from price increases or does all that price kind of go away and i would

just assume that we're going to manage the conditions and we'll be agile and responsive to what we see and then want to predict outcomes and uncertainties progressively.

Your next question comes from the line of Walt Lip Talk with Seaport Research. Please go ahead. Hi, Mr. Walt. I think your line is on mute. Oh, sorry about that. Morning, everyone. So I just

wanted to uh to ask about the um uh you know we get it on the the you know uh surcharging and you know price increases and how that could hit uh volumes but i wonder if um you talk a little bit more about uh some of the things you just mentioned about you know finding you know new local suppliers you know if that's possible for you know electronics yet you know are you seeing opportunities for reshoring, and in automation, as you're talking to your customers, are some of the quotes on reshoring, especially around automation for the auto sector?

Sure. Well, as we go through the categories of products that we buy that Gabe mentioned earlier, We buy a lot of steel outside the U.S. That's largely a function of limited supply domestically of people that want to make welding-grade products, right? So reshoring, steel buying is a very long cycle activity that requires significant investment on behalf of our suppliers. And then you look at electronics. You know, the global electronics industry, a lot of the core components for transistors and blank circuit boards and the like has moved to China. And so while you can look at setting up operations, either our own or a supplier outside in other countries, you're still going to have an impact of buying the raw components from a country that's being heavily tariff. And then on accessories, a lot of the things like welding guns and helmets and the like are sourced out of China because it's the only cost-competitive source of supply for doing that. We're working with our suppliers to look at them setting up other operations in Vietnam and other places that are less subject to tariffs, but there's some lead time in doing that as well. So, both we and they are racing to try to do that, but there's going to be a period of time where we're going to need to take pricing through to cover the tariffs to protect the business, right? So, we're pulling all levers simultaneously, and it's really a question of trying to balance this interim period and manage through it.

Okay, great. And then just on the flip side of that, are you seeing, is it too early? Still, are these longer, too long cycle to see automation projects that are kind of tied to reshoring or bringing automotive manufacturing back into the U.S.?

Well, I think a lot of the quoting activity we see is tied to that. And part of the uncertainty is people not wanting to pull the trigger on a major capital investment if there's uncertainty and fluidity around whether the trade policies are going to stick or not. So if you're looking at reshoring something in the U.S. to get out from under a 50 percent tariff and there's risk that the 50 percent tariff goes away or gets reduced significantly in the next 100 days, you're probably going to sit on the sidelines and wait to see how that gets resolved. So there is a lot of interest in reshoring, but whether that interest will translate into actual project activity is the open question.

Our final question comes from the line of Chris Dunckart with Loop Capital Markets. Please go ahead.

Hey, morning, guys. Thanks for taking the questions. um forgive me if i missed it but i believe you made a comment around you know the the pricing offsetting volume for the for second quarter specifically i guess one can you kind of walk through you know what kind of went into that algebra why that's the expectation in 2q and is that what you've seen through april to date here yeah chris the the algebra is pretty straightforward

that's what we've seen through the month of april so we're at this point we don't know any better to say pricing will be, you know, an increment to volume or volume will overcome pricing. We just don't know at this point. But what we've seen through the month of April on the order intake side is they're roughly offsetting each other.

Got it. Super helpful. And just following up, speaking to the automation portfolio, if I remember correctly, you guys do include both automation equipment and the consumables that go through that equipment, I guess, can you remind us of that split today to try and get arms around what project delays could kind of impact on that business?

No, Chris, we do not include consumable activity within our automation business. So that's strictly the equipment components, the robots, the larger projects that are tied into our automation business.

Very helpful. Thanks so much, guys.

Thank you, Chris.

This concludes our question and answer session. I would like now to turn the call over to Gabe Bruno for closing remarks. Please go ahead.

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