Q2 2023 Vontier Corporation Earnings Call
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Good morning, ladies and gentlemen, and walk up to the second.
At this time.
The listen only mode.
The presentation, we will conduct a question and answer session.
Anytime after this call if you require immediate assistance <unk> for the operator.
Call is being recorded on Thursday August three 2003.
And the <unk> will be available shortly after.
I'd like to turn the cartridge over it you're right.
40th Vice President of Investor Relations. Please go ahead.
Thank you good.
Good morning, everyone and thank you for joining us on the call. This morning to discuss our second quarter results with me today are Mark rally, our President and Chief Executive Officer, and Inhuman Augur, our senior Vice President and Chief Financial Officer.
You can find both our press release as well as our slide presentation that we'll refer to during today's call on the Investor Relations section of our web site and investors Dot volunteer Dot com.
Please note that during today's call, we'll present certain non-GAAP financial measures will also make forward looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate well or may occur in the future.
These forward looking statements are subject to risks and uncertainties.
Actual results might differ materially from any forward looking statements that we make today.
Assume any obligation to update them.
Information regarding these factors that may cause actual results to differ materially from these forward looking statements is available on our website and our SEC filings.
Before I hand, the call over to Mark I'm Gonna take a moment to remind everyone that beginning last quarter. We are now reporting and discussing our results in line with our updated segmentation.
Additional information regarding our segmentation is included in the appendix of today's presentation.
Mobility technologies reported low double digit baseline growth led by double digit growth DRP and our alternative energy businesses.
Second and our environmental killing segment, we continue to see strong performance and R. U S dispenser business driven by significant expansion refresh and rebuild activity.
And in our repair solutions segment Macko continues to capitalize on a very strong and market dynamics delivering solid same store sales growth and net franchisee add this quarter.
Supply chain conditions continue to normalize in queue to enabling our teams to convert higher levels of backlog and exceed our top line commitment building on our record a strong operational execution.
Recent channel checks in customer conversations indicate that the demand backdrop across our end markets remains constructive supported by strong secular tailwinds and attraction, we're gaining an accelerating growth across the portfolio.
Our book to Bill was nine seven in line with what we were anticipating and comes after a solid Q1 performance.
Order activity and healthy leading indicators along with elevated backlog levels provides confidence in our outlook for the full year.
Are reported operating profit declined versus the prior year as expected due to the sunset of Ian V.
I want to share with you why I'm excited about the underlying performance of our businesses.
Baseline operating margin expansion of 230 basis points demonstrates the power of Bbs to deliver operational excellence and rigorous execution as well as incremental progress on a restructuring actions.
We remain on track to deliver the $45 million in your savings, which is at the high end of the range. We committed to you earlier this year.
I am confident in our ability to achieve our multiyear margin expansion target as we continue on the path of optimizing our businesses.
I am pleased with what we've accomplished through the first half and I'm confident in our outlook for the remainder of the year.
Importantly, where laser focus on executing on our strategic vision to accelerate grow with the depth and breadth of our portfolio word uniquely positioned to capitalize on the strong sechler tailwinds within the mobility ecosystem and we're seeing those play out in our ongoing performance and outlook.
As we will share with you over the next couple of slides, we're seeing strong traction on our connected mobility strategy.
Juruti of our end markets are experiencing a shared set of growth drivers.
For example side expansions modernizations and industry consolidation, increasing regulatory compliance increasing side complexity, increasing carpark complexity Andy carbonization.
Underpinning these trends in the mobile ecosystem is it dry for greater productivity and automation, which means higher levels of capital investment by our customers.
Turning slightly sick you.
You may recall from our Investor day, and our first quarter earnings call are connected mobility strategy is centered around driving operational excellence and accelerating growth through we're expanding our core businesses and gaining leverage to adjacent markets.
We refer to these as our three pillars optimizing the core expanding the core and leveraging adjacent markets.
Starting with expanding the core we recently announced a formal rebranding of our legacy television or retail solutions business too and Banco by T. V. R. A significant milestone in a process that accelerated following the acquisition of <unk> last year.
This is more than rebranding this is about better positioning our convenience retail and fuelling businesses for long term success, providing greater depth to meet our customers needs.
<unk> in our business is gives us greater focus and transparency, both strategically and operationally to truly accelerate growth for both businesses.
In the case of an echo by G. B R. The creation of this platform enables us to better serve our convenience retail customers and new more innovative ways by focusing on the outcomes that are most important for that.
At the same time, we're better able to focus on and solve for the unique set of challenges are fueling customers are facing.
<unk> G. B R brings together our core point of sale payment cloud base analytic software inside automation platforms with the bank goes payment technology and Microservices software.
The combination creates a portfolio best in class automation technology and the next generation operating system that enables convenience retailers to increase productivity and drive better customer engagement.
We are deploying a cohesive platform with increase agility and how we develop and bring the market connected hardware and software solutions.
Now better position to serve as the preferred technology provider for C store operators with a unified strategy and product platforms, leveraging global scale and delivering more flexible modular solutions last quarter, we announced the rollout.
Innovative NSX solution to 13000 shell locations. Another large scale fueling c-store operator awarded US a project with similar skull. This time with an 8000 store deployment set to begin in the third quarter.
The recent and effects wins and growing pipeline will opportunities demonstrates the power of our differentiated automation capabilities combined with unmatched channel presence.
The team is doing a fantastic job accelerating growth and I'm excited about the path that we've laid out for this business.
Let's turn to slide seven and focus on pillar three leveraging adjacent markets for growth.
Of all our business combining our drive E V charging network software with our Sparky on AI, driven energy management business enabled us to better support EV charging providers and fleet operators in scaling they are easy infrastructure.
We provide an interoperable solution that simplifies and improves the customer charging experience.
You are likely aware of the unprecedented level of incentive dollars for EV charging infrastructure across many parts of the globe in the U S alone the bipartisan National EV infrastructure funding program established $5 billion in federal funds available to states that strategically deployed EV charging infrastructure and credit.
Interconnected network through 2026.
This is in addition to the billions available by way of tax credits for alternative fuels infrastructure under the inflation reduction Act.
In Europe investment in E V charging infrastructure continues to ramp led by the European investment Bank, The European Commission and National governments.
By some estimates hundreds of billions of dollars of investment will be required to reach their target for expansion and reliability of EV charges across the continent.
Okay.
Having doubled exports under management in 2022 drives currently manages more than 40000 port and is on track to double yet again this year reinforcing the compelling value proposition of hard drives operating system.
During the quarter drive sign a number of new tier one customers, who are scaling their infrastructure rapidly and.
An initial deployment. These recent wins will add more than 20000 additional ports under management.
From a quantity of ports on our management standpoint, the drives platform is one of if not the largest managers of high speed charging networks globally.
Our current scale rate of growth and momentum is recognition that we have the leading operating system that allows interoperability.
Drives provide the critical connective tissue between and amongst a rapidly growing and diverse number of global charge point operators.
S EV charging infrastructure and utilization continue to expand rapidly.
Consumers demand a more simplistic reliable and accessible charging experience drive is in the pole position with hardware agnostic solutions that enable a seamless.
And more reliable charging experience, including with self healing algorithms.
In addition to leading productivity and automation solutions. Our customers are also investing in a more sustainable future.
Benefits are comprehensive multi energy portfolio of solutions.
Our alternative energy solutions business is a leading global supplier of compressed natural gas and renewable natural gas infrastructure solutions, and an emerging leader and hydrogen.
These are attractive growth markets, where we have market leading capabilities.
Are sustainable fleet customers remain committed to C. N G. N RMG there are continuing to invest in their own infrastructure Buildout and we're seeing early demand for our hydrogen solutions.
We recently completed our 100 R&D station with waste management, now Wm, who uses landfill gas to fuel their fleet and supply the grid with renewable natural gas.
W. M has a network of over 22000 trucks running on C. N G N RMG in the U S and recently announced plans to expand that network even further over the next three years.
We're incredibly proud to partner with them to support their infrastructure Buildout.
Brought our industry acceptance and support for clean hydrogen continues to gain momentum.
In June the department of energy unveiled its national clean hydrogen strategy and roadmap, which aims to increase hydrogen production from near zero today to 10 million metric tons by 2030, and 50 million metric tons by 2050 through the use of hydrogen hubs.
The investment Rokahr develop this infrastructure is anticipated to be nearly $10 billion and we're well positioned to support this infrastructure buildout with decades of domain expertise and a robust channel presence for fueling with high pressure fuels.
We are shipping our first hydrogen units this month.
With key customers lined up to take delivery over the next several months.
Now I'd like to turn the call over to inhuman to provide for more color on our financial results and update you on our outlook for the full year.
Thanks, Mark and good morning, everyone.
I'll start with a summary of a second quarter performance.
Please turn to slide it.
Reported revenue for the second quarter was $764 million down just under 2% from the prior year on both the reported in core basis.
Excluding the impact of ENV.
Baseline growth was approximately 9%.
Exceeding our second quarter guidance and led by low double digit growth and mobility technologies.
In the high single digit growth and Ah fueling business.
Approximately 40% of this 9% growth was attributable to price.
But importantly, we are getting good volume growth across the portfolio.
As Mark mentioned, we're executing dwell on a strategic initiatives to accelerate growth, which is reflected in the how the baseline growth we've seen in the first half.
We continued to benefit from normalizing supply chain conditions and cute too.
Which allowed us to convert higher levels of backlog again this quarter.
Total adjusted operating profit was hundred $60 million, which was down roughly 7 million year over year.
Driven by the expected headwind from the ENB Sunset.
Adjusted operating profit margin was 29% slightly better than our guidance range.
Baseline margin expanded 230 basis points benefiting from price cost performance and improve productivity savings.
We continue to gain traction on a restructuring activities.
But most actions complete and savings ramping into the second half.
Adjusted earnings per share of 67 cents was above the high end of guidance range supported by the higher revenue.
Adjusted pre Castro for the second quarter was $77 million, but conversion of 73% a significant improvement versus the prior year. The result of disciplined working capital management.
Turning to the performance of three segments, starting on slide nine.
Mobility technologies topline increased over 13%, but solid performance across the board.
Growth was approximately 5% with baseline for growth of 10%.
<unk> solutions business reported a low double digit increase in sales capitalizing on our market, leading solution and attractive turnoff carwash space.
Failed into alternative energy solutions business were up over 40% of this quarter.
Which comes after strong double digit growth in the prior year.
Demand for alternative fuels like compressed and renewable natural gas and hydrogen remained strong.
As Mark noted earlier, we have an enviable position across the multi energy landscape and remain optimistic about the opportunities ahead of us.
<unk> G B R teller tracking evolved all performed well.
Benefiting from strong secular drivers and increase adoption of a connected solutions.
Segment operating profit of approximately $45 million increased 5% over the prior year and translates to 18.7% operating profit margin.
150 basis points from the prior year, but in line with our expectations for the quarter.
Makes related to the <unk> acquisition and ongoing growth investments are the primary driver behind the decline in profit margin as we continue to invest strategically across mobility technologies.
Most notably and <unk> and evolve.
<unk> ability for the quiet and rental business increased or high single digit margins in Q2 from breakeven in Q4 and Q1.
But cinergy still expected to ramp later this year.
Turning to repair solutions on slide 10.
Macro revenue increased 6% to $158 million for the quarter.
The demand backdrop remains robust as technician employment.
Wages.
<unk>.
Ancient complexity of the car park and demand for auto repair all remain at high levels.
Top line growth was supported by the same store sales increase of mid single digits.
But solid growth across to storage hard line and power tools.
As well as positive net franchisee adds a continuation of the strong growth we saw in the first quarter.
Operating profit of $42 million is in line with the prior year results in operating profit margin declined hundred 50 basis points, driven primarily by year over Europe reserve adjustments related to the receivables portfolio as we previously communicated.
Walking out to the second half.
We do anticipate the largest had been related to reserve adjustments in Q3 this year.
This flips through a slight tailwind in queue for.
Which will benefit us on the margin right.
Matt gross but that expenses normalizing back to pre pandemic levels.
And finally, environmental and fuelling solutions on slide 11.
Reported revenues declined about 10%.
$339 million as strong demand and R. U S dispenser and aftermarket businesses was more than offset by the impact of the ENB sunset.
Segment operating profit was $95 million and the operating profit margin expanded hundred 90 basis points to 28.1%.
Margin performance at the result of a previously announced restructuring actions and continued execution on price cost.
Turning to slide 12 cover a balance sheet and free cash flow detail for the quarter.
And Q2 rebate hundred million in debt, reducing our net leverage to 2.9 times within our target range of two and a half to three times.
In early July prepaid down an additional 35 minutes.
At bringing the total for your two dead pay down to $200 million.
Now anticipate achieving the high end of a prior debt pay down range or about $250 million for the full year.
Additionally, we completed $32 million in share repurchases during the quarter for a year to date repurchase of $50 million or 2 million shares.
Since we began a share repurchase program in 2022, we have reduced our outstanding Shrek count by around 9% at an average share price of just over $24 per share.
Turning to the outlook assumptions on slide 13.
We are initiating third quarter guidance for adjusted EPS of 65 cents to 69 cents, which assumes mid single digit decline in for sales or an increase of mid single digits plus excluding the impact of ENV.
We expect adjusted operating margins to decline between 370, and 420 basis points and roughly flat on a sequential basis.
Just to provide a bit more color on margins.
Third quarter margins last year were abnormally strong underpinned by a few favourable items.
You May also recall that fourth quarter margins were lower than normal seasonality last year.
Giving us an easier comparison and will allow for outface margin expansion in Q4.
Net net there are no changes to our planning assumptions for the second half profitability.
For the full year.
We are increasing the low end of our adjusted EPS guidance strange, 2% to 79% to 287.
270, 722 87 previously.
As Mark noted earlier.
There is no change to our assumptions for the headwind related to the ENB sunset.
As a reminder, this had been ram sequentially into the second half.
No material changes to other planning assumptions for the full year, which are now included as a slight in the appendix, but that I will turn the call back over to Mark.
Thanks and chairman.
Frontier is a company in motion transforming and aligning our portfolio to deliver sustained mid single digit revenue growth industry, leading profitability double digit earnings growth and significant free cash flow.
We are executing are connected mobility strategy, leveraging our market leading positions to capitalize on robots sackler tailwinds and unique growth drivers benefiting the mobility ecosystem.
The most prominent theme underpinning these growth drivers is the need for greater productivity <unk> across the mobility ecosystem.
Volunteer as well positioned with unique domain expertise and the ability to offer differentiated solutions to deliver on this theme.
Let me Spike this out by segment and mobility technologies, our customers are rapidly adopting connected cloud based solutions and are seeking to significantly improve asset in labor productivity.
Leveraging digitally enabled technology to connect and optimize the management of our customers assets, we provide differentiated operating systems for C stores, Carwash fleet and EV charging networks, that's all our customers high volume challenges.
And repair solutions, the need for greater productivity, driven by the energy transition labor shortages and an aging car park are driving significant opportunities for <unk>.
The repair rich segment of the car Park is expected to grow and a 3% tagger through at least the next decade.
Drivetrain complexity and increasing technology content is driving further growth to mid single digit due to the size and makeup of the toolkit, the technicians and shops need to carry.
<unk> is well positioned to respond to these secular trained and equipped the garage in the future, it's agile business model, providing higher product vitality.
And environmental and fuelling solutions, they need to comply with increasing regulations.
Address labor constraints and managing expanded site footprints increasingly requires connected devices to improve asset efficiency.
A great example of this is our automated tankage system and our environmental business.
This system recently received California Air Resources Board certification, making it the most modern certified solution in the market complying with the highest standards of paper recovery in California.
With its remote connectivity and expand capabilities, while ensuring the highest level of compliance. It is well timed as weren't early innings of a significant underground upgrade cycle in the U S.
Across all of our segments, we're capitalizing on the need for increased productivity and automation and we are positioned for future growth with a robust and growing pipeline of opportunities across the mobility ecosystem.
As we progress through the multi decade energy transition our portfolio is uniquely positioned with broad multi energy solutions to address the energy trilemma facing the world the need for sustainable secure and affordable energy.
We are a global leader with a comprehensive suite of solutions for petrol based fueling, including environmental technologies, CMG and RMG fueling systems hydrogen fueling infrastructure and he'd be charging solutions.
Different modes of transportation industries, and geographies will require a range of energy solutions and volunteers portfolio is poised to capitalize on the changing mobility landscape.
Through a clear vision expansive channel presence and leading technological capabilities, we are enabling the way the world moves driving smart sustainable solutions for our customers employees and shareholders.
Without operator, we're ready to open the line for questions.
Thank you, ladies and gentlemen, if we will now begin the question and answer.
Session should.
So did you have a question <unk> on your telephone keypad, you'll hear a prompt acknowledging your request questions will be taking any already received particularly she canceled your request. These past the style <unk> one moment. Please for your first question.
And your first question comes from the line of Joni Mitchell from Black. Please. Please go ahead.
Thanks in good morning.
Maybe just the first question around environmental and fuelling solutions, Yeah that business. The core sales are down you know eight 9%.
Q too.
Just wanted to it sort of how you're seeing.
Just sort of you know exit right from this year in terms of fourth quarter organic sales.
And any initial help you could give us so I'm thinking about the pace of sort of cyclical recovery to next year in E. S. S.
When you think about sort of customer replacement rates a baseline demand.
If there's any sort of destocking going on in that business right now that reverse his next year. Many health at all on that point. Please.
Generally good morning, this is mark.
It's a little early to getting a guidance for 2024, but let me give you some color in terms of what we're seeing in how we see it playing out so first of all what's essentially happening is that we.
We are sunsetting, the ENB strong sackler driver that we experienced a number of years and that is there is no change that whatsoever and so what we're seeing this year is certainly that year over year compare but the underneath baseline.
Cross is very strong in that business and what's driving that is that we sell our products to.
Predominantly the larger players in the industry and they're doing an industry consolidation, they're doing refresh and rebuild their doing new acquisitions of sites and and many of these folks have announced plans. They go out well into the future and when we do our Congress.
Patients with our customers and our channel checks, we see that that that that driver is not only intact for this year, but that drivers building out into next year, yes interest rates have gone up but a lot of these folks have great access to capital, they're getting outstanding returns on building out there for format.
Not refreshing rebuilds, we're very well positioned to experience that graph. So I don't know if you want to add any color their inhuman.
I think the secular drivers industrial consolidation that Mark talked about are very important and that are continuing to help drive. This industry forward. This business from a C store perspective has been Brazilian through economic cycles in the Boston, We're seeing continued investment so we feel good about this business.
That's very helpful. Thank you and then just maybe shorter term you have that steep year on year margin decline in the third quarter.
And then it sort of eases with the comes into the fourth quarter.
Maybe help us understand eaten now if we're thinking by segment.
You know anything major to sort of cool out as we go through Q3 and four in terms of the the margin development, maybe an easy ways to look at it sequentially. It looks like you've got flattish margins sequentially.
And then in two three and then maybe 100 points plus in queue for.
Do we see kind of all three segments moving similarly with that sequential changing margin.
Yeah, Julia on the margins for Q3, we had a tough compare year on Europe , because last year, we benefited from a few items, but when you start thinking of margins sequentially from cue to cue three relatively flat flattish across all three segments give or take and then ready to ramp into two four.
Driven by a few things once the seasonality of volume Q for being our strongest quarter at good Incrementals, that's going to drive higher margins for US second thing is the ramp up <unk> synergies and when I talk about synergies, it's bullets from a revenue perspective, but some of the great winds that we've announced plus also the cost benefit.
For example, in Vancouver payment on our dispenses going through the certification, which will start in queue for shipments and then finally, the restructuring savings, which most of actions have been completed there's some ramp into the fourth quarter. So all of that helps a margin rates for the fourth quarter.
That's very helpful. Thank you.
Thanks Julian.
Thank you and your next question comes in the line of Andrew Open from Bank of America. Please go ahead.
Sure. Just this is David on for Andrew Open wondering if if you did see any impact from Destocking and.
Is any included in your forward guidance.
Yeah, David This is mark the morning.
The Destocking is not a big issue for our business. We've certainly seen some pockets of businesses overall sort of post COVID-19, where some inventory has been built out but if you look in our businesses and certainly at the platform level. We're seeing strong underlying growth that is reading through and I think is quite.
Evidence so I think it's indicative of our positions in the market our product lineups that we have and we're continuing to see really solid demand.
Got it. So you you don't you're not concerned about inventory levels that distributors currently.
It's.
There are smaller pockets of that but I think the the overriding.
Sentiment that we have is is the basic strength that we have in the businesses. So it's not it's not something that's a big part of our business.
David just to add importantly, the areas, where there could be some destocking and there's nothing that is unanticipated is less than 15% of our total revenue so not not a material part of our business where we.
We would get impacted by any destocking everything's playing out as expected no surprises.
How do these recent wins change kind of your <unk>.
Projector winco.
How do you think about gross over kind of.
Longer term three year plus type time horizon.
Yeah, I think what we're seeing what's <unk> by Jvr in these recent ones that we have is just build off the momentum that.
We've previously announced and I think it's an outstanding growth platform.
Mobility technologies is a set of businesses with leading operating systems that serve the mobility ecosystem and whether you're talking about the convenience store, where we're getting outstanding attraction as.
This industry is consolidating they're trying to get operational productivity of their assets, having to deal with ongoing regulatory changes and they need the software to be able to operate dot and be more productive and so we're seeing <unk> G. B R and and those recent wins clearly building up some really.
Significant momentum there and then that also links with the other operating systems and the space, whether it's the Carwash systems are electric charging network filled out and we think that over a longer period of time that a cruise.
To a very solid growth rate, which gives us confidence in our mid single digit growth for volunteer overall.
I'll also just add that really when you think of the business model not only do you get the initial hardware sale. Because these are intelligent hardware plus software devices. You'll also get the recurring revenue, so which gives us longterm traction invisibility into a revenue out there.
Perfect. Thank you very much.
Thank you and your next question comes from the line of <unk> <unk>.
<unk> research. Please go ahead.
Thanks, Good morning, everyone.
So more than I do y'all be moaning waterbuck there'll be remains a very strong double digit growth I think north closed plus 20.
They can.
Just how does the second half look Whoopi got picked it up at the yuppie and the spirit and my question is that your <unk> your.
Your major competitor cold out some weakness in that car wash business. So just just curious you know how you see this second half the building.
Yeah. So naturally we still see really solid growth in this business I think what you are highlighting is what we've been talking about is that we see slowing growth, but still really high growth. We believe that this is gonna on a normalized into a high single digit growth rate and the reason being in the reason why it gives us confidence is that we.
See a lot of folks in the space that are consolidated in the industry. There continue to build out their footprint and they need the tools to be able to manage that more effectively.
I need the software to make that more productive they need the software and capabilities for connected hardware to provide for a better consumer experienced then you'll know how to price accurately in this environment and we provide the tools and capabilities to do that we don't we don't make the rollers, we don't make the brushes, we don't make the hardware or we may see intelligence to enable folk.
Consolidated the industry to be more productive it'd be better to attract our consumers and that's exactly where we think the market is going and that's why we're seeing the growth out of that business.
That's great and then my photo on this on the on the U S expenses.
It seems like you you track pretty much online with a 50 80 minute on because 80 million dollar headwinds it was more or less what you reported I think this quarter.
We normally see some seasonal build enough business in the second half of the year. It doesn't doesn't look like your your guide and bets that so but yet the commentary sounds pretty bush. So just just trying to square the circle to any help.
Yeah. So.
What.
We said in the prepared remarks that $300 million, which is the ENB sunset, there's no change to that.
Putting that aside the underlying business, which is the U S dispensers for new to industry or site refresh rebuilt that is actually trending better than our expectations were at the beginning of the year and we're seeing strong growth in that business. So there will be a ramp into baseline U S.
Spencer business, driven by new to industry Psych refresh psych rebuilt.
We have a good market share with the large reach.
Regional National and regional players that are building out, but what we also said as the 300 million peak to trough for <unk>, there's no change to that.
Okay. That's great and then just it it might be helpful to to maybe just unpack the margins by segment for three Q.
The former base points of contraction, but.
Personal.
Yeah, I think the best way to think about margins by segment for the third quarter are relatively flat give or take 50 basis points plus or minus two two of this year. So.
Sequentially fly to shop.
Last year, we had a few items that.
Meg compares a little difficult.
Really start thinking of margins sequentially from future to Q3 by segment and there'll be more helpful to model out.
Okay. Thank you.
Thank you once again should you have a question <unk> and one on your telephone keypad.
And your next question.
<unk> from C. D. Please go ahead.
Hi, Good morning, this is <unk> and Catholics good morning.
<unk>.
Hi, just a follow on to a previous question.
Volunteer is targeting 35 per cent recurring revenue in the next three years 40 per cent by 2028 with 30 per cent currently and you called out to Wednesday night, and I couldn't be charging would you characterize yourself as I had to pay you can achieve in the near term goal.
Yeah, I think the recurring revenue theme is no question building some momentum here now.
Not only did we talk about the build out of the operating system for electric charging networks, but also and then go by T V. R and effects solution that is predominantly all fast software and they said cloud based software that is there is a connected hardware component, but that's a relatively small portion of that sale years or more.
Your contracts for a five year.
Contracts that provide SAS offerings. So I think you can really see many parts of our business building on that recurring revenue theme.
Oh, that's a great color and my follow on US your shipping your first hydrogen Unix this month and given the need some hydrogen infrastructure in the United States and the projected 10 billion.
Hydrogen related standby 26, do you have a sense of how big a driver hydrogen can be pretty anti business loan okay.
Yeah can you know, it's it's a great stepping stone for us because we're experts in a dispensing high high pressure predominantly LNG RMG requires that it's difficult to do given the the reliability and safety concerns and regulatory concerns around that so far.
US it's a very natural stepping stone.
<unk> business as you can see Angie business is experiencing very high growth now and the businesses is approaching about $90 million at the end of this year at a very strong growth right and we can build off that that platform with hydrogen and we see a an excellent pipeline of folks that are really lined up.
To be able to benefit from that it's not just dispensing. It's the entire a turnkey solution for hydrogen. So we definitely see that is across all of our building off the Angie business space.
Thank you.
Thank you Mister Daniels I get questions at this time. Please proceed.
Yeah. Thank you again it before it closed I just wanted to thank the teams across volunteer.
Incredibly proud of the performance and dedication of our teams that really enable us to deliver cop to your financial performance.
And I think that benefits not only all employees, but all our stakeholders. So thank you for joining us on today's call and we look forward to catching up with many of you soon have a great day.
Thank you, ladies and gentlemen that does conclude our conference Brittany. Thank you for participating in me I'll just connect.