Lincoln Electric Holdings, Inc. (NASDAQ:LECO) Q3 2024 Earnings Call Transcript October 31, 2024 10:00 AM ET

Company Participants

Amanda Butler - VP of IR and Communications
Steve Hedlund - President and CEO
Gabe Bruno - CFO

Conference Call Participants

Bryan Blair - Oppenheimer
Angel Castillo - Morgan Stanley
Mig Dobre - Baird
Saree Boroditsky - Jefferies
Adam Farley - Stifel
Walt Liptak - Seaport
Steve Barger - KeyBanc

Operator

Greetings, and welcome to the Lincoln Electric 2024 Third Quarter Financial Results Conference Call. All lines have been placed on mute 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, and you may begin.

Amanda Butler

Thank you, Kayla, and good morning, everyone. Welcome to Lincoln Electric's third quarter 2024 conference call. We released our financial results earlier today, and you can find our release and this call slide presentation at lincolnelectric.com in the Investor Relations section. Joining me on the call today is Steve Hedlund, President and Chief Executive Officer; and Gabe Bruno, our Chief Financial Officer. Following our prepared remarks, we're happy to take your questions.

But before we start our discussion, 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 US GAAP. A reconciliation of non-GAAP measures to the most comparable GAAP measure is found in the financial tables 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?

Steve Hedlund

Thank you, Amanda. Good morning, everyone. Turning to Slide 3, we generated solid third quarter results with strong profit performance, cash generation and a 134% cash conversion rate despite a broad deceleration in demand due to challenging end-market dynamics and our mix profile. All results highlight the resilience of our business model through the cycle through the strong execution of our strategic initiatives, disciplined cost management, adjustments made to employee-related costs, which now align incentive compensation with business conditions, and the initial benefits of our temporary cost saving measures. As a result, we achieved a slight increase in our gross profit margin and a 17.3% adjusted operating income margin, which is modestly lower versus prior year and relatively steady sequentially. The incentive compensation adjustment had a 70 basis point favorable impact to our adjusted operating income margin. While not an easy quarter, I am extremely pleased with our performance as we are holding margins above our higher standard average target of 16% despite top line challenges.