Conference Transcript - LECO 2026-09-10

Operator

Talk about how you build a funnel, what types of things you're looking for.

Speaker 1

Yeah, so I point to last 10 years, our CAGR is 480 basis points of growth. So as we drill of our building blocks for the long term, we said 300 to 400 basis points kind of fits the model. But very active level of engagement. We have a corporate-led function on M&A and strategy that works alongside our business units to identify bolt-on opportunities in a very disciplined way. We're a very mindful evaluation, what kind of bolt-on strategies that make sense for our long-term positioning in the markets. How do we ensure we're at that mid-teens returns by year three? So very disciplined, active level of engagement, and it's broad-based. You see in our materials kind of what the last few years meant to us in terms of acquisitions. You've got America's transactions, international transactions. You've got Harris' transactions. It's all driven by a level of engagement across our business units with an active level of oversight and drive across the enterprise executive team. And that's how we manage it. The board's very much engaged. Very much we want to deploy capital and growth. So we're focused on double the level of internal investment and all what we just talked about and enterprise initiatives, but also look to M&A being an important strategy for us. So it's very key for us.

Operator

Are there any metrics around what the pipeline looks like?

Speaker 1

I would just point to it. Very active, very broad-based. Now, the day doesn't go by where there's some level of engagement and some level of a pipeline, but it's broad-based. So it could be an automation-type focus. This could be a welding focus in the U.S. We had a couple of really nice acquisitions over the last few years that tie into technologies, whether it's in wear or whether it's in mobile power, that just really nice, attractive ways to grow.

Operator

And remind us where you are on leverage and what your targets are.

Speaker 1

We have a target that we set about 1.75, but we're tracking when you look at net leverage of close to 1.2, 1.1. So we've got a lot of flexibility. Okay.

Operator

And if the rate acquisition doesn't come along, can you buy back shares or is that not a priority?

Speaker 1

That's what we do. Our priorities are to deploy capital for growth. So that's internal investment and acquisitions. We've had a steady since going public in 1995 on NASDAQ, had a steady increases in dividend rate for the last 30 years. And then any excess strategic cash, we're covering maintenance, which is somewhere around $75 million right now per year. And then we'll buy back shares with excess strategic cash. And that's how we do it.

Operator

Another chance for questions from the field? Pregnant pause? So that's gone through most of what I wanted to talk about today. So maybe I'll just put it back to you. I mean, we seem to be seeing kind of your first volume growth year under rise. And what would you counsel investors to sort of focus on? What do you think the market may be sort of underappreciating here in terms of this?

Speaker 1

Yeah, it's a few things. One, I'd point to the dynamics of the short cycle component of our business versus a longer cycle. We've been intentional in shaping our model with more long cycle capital investment opportunities to serving our customers. So while there's historically a view of Lincoln being short cycle, very much positioning to have longer capital investment-driven type decisions from our customer base that were long-term. So pretty important for us. The discipline of execution, despite the cycle, you've seen that in our business. We've got a long track record of managing an expansion and a contraction with a continuous focus on shaping our business model. this is what gives us conviction that we'll continue to enhance the operating model of our business the conviction to go from 200 basis points on average improvement to 300 basis moving from incrementals from mid 20s to high 20s all very important for us and then how we shape that we've evolved our business to have an enterprise type focus versus a regional particularly on the operation side the engineering side and we'll continue to drive that those are real opportunities for us when you look at a long trajectory of how we've shaped our model it has been about gaining more leverage in the disciplines across all of our businesses so very much focus on the areas of operational excellence how do we drive improving level of customer intimacy with our elite program on the customer side so very much focus so we've just finished another round of We call it RISE sessions across our corporation where our CEO is out and engaging all of our different teams around the world. And so we're pretty excited of where we're headed. It's rounding out the first year on RISE, and he has some pretty attractive objectives. And the volumes do progress positively for us, and we're excited about what the market progression looks like for us.

Operator

Great. Very clear. All right, with that, we will wrap it up. Thank you so much.

Speaker 1

We appreciate the answer.