Illinois Tool Works Inc.

If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. For those participating in the Q&A, you will have the opportunity to ask one question and if needed, one follow-up question. Thank you. Karen Fletcher, Vice President of Investor Relations, you may begin your conference.

Thank you, Eric. Good morning and welcome to ITW's fourth quarter 2023 conference call. I'm joined by our president and CEO, Chris O'Herlihy, and senior vice president and CFO, Michael Larson. Also with us today is Aaron Linehan, who joined our investor relations team last month as vice president. Aaron, welcome to ITW. During today's call, we will discuss ITW's fourth quarter and full year 2023 financial results and provide guidance for full year 2024. Slide two is a reminder that this presentation contains forward-looking statements. Please refer to the company's 2022 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations. This presentation uses certain non-GAAP measures, and a reconciliation of those measures to the most directly comparable GAAP measures is contained in the press release. Please turn to slide three, and it's now my pleasure to turn the call over to our President and CEO, Chris O'Herlihy.

Thank you, Karen, and good morning, everyone. In Q4, we delivered a solid finish to a year of high-quality execution in the face of some pretty unique challenges, including slowing demand for CapEx, headwinds from customer and channel inventory reductions, and an automotive industry strike. As a result, organic growth was essentially flat in the fourth quarter. Operating margin came in at 24.8%, with 150 basis point contribution from enterprise initiatives, and free cash flow grew almost 40%. Gap EPS of $2.38 included 4 cents of unfavorable impact the devaluation of the Argentine currency. Throughout 2023, the ITW team continued to leverage the strength and resilience of the business model and our high-quality diversified business portfolio to deliver a year of strong operational and financial performance, including solid organic growth of 2% on top of 12% growth in both 2021 and 2022, operating margin of 25.1%, and operating an improvement year-over-year of 130 basis points, income growth of 7 percent to a record $4 billion, after-tax ROIC of more than 30 percent, 50 percent plus free cash flow growth, and GAAP EPS of $9.74. We delivered these results while investing almost $800 million to sustain productivity and accelerate our organic growth initiatives in our highly profitable core businesses. As we outlined at our investor day, our key strategic priority as we enter this next phase of our enterprise strategy in 2024 is to build above-market organic growth fueled by customer-backed innovation into defining ITW strength on par with our world-class financial and operational capabilities. Turning now to our 2024 guidance, we are encouraged by what we are seeing in terms of demand across the majority of our portfolio, along with some meaningful improvements in both customer and channel partner inventory levels and input cost inflation, as well as continued progress on customer-backed innovation. Per our usual process, our organic growth projection for 2024 of 1 to 3 percent and our EPS guidance of $10.20 at the midpoint reflect current levels of demand adjusted for seasonality. Operating margin is projected to improve by about 100 basis points at the midpoint to a range of 25.5 to 26.5%. This includes another solid contribution of approximately 100 basis points from enterprise initiatives. Before I turn the call over to Michael to provide more detail on the quarter and full year performance, as well as our guidance for 2024, I want to thank my ITW colleagues around the world for their extraordinary dedication and commitment to serving our customers and executing our strategy with excellence, and for their incredible support as I transition into the CEO role. Michael. Thank you, Chris, and good morning, everyone.