Q1 2024 Dover Corp Earnings Call

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Operator: Good morning, and welcome to Dover's first quarter 2024 earnings conference call. Speaking today are Richard J. Tobin, President and Chief Executive Officer, Brad Cerepak, Senior Vice President and Chief Financial Officer, and Jack Dickens, Senior Director, Investor Relations.

Speaker Change: Good morning, and welcome to Dover's first quarter 2024 earnings Conference call speaking today are Richard J, Tobin, President and Chief Executive Officer, Bud for packet Senior Vice President and Chief Financial Officer, and Jack didn't skins Senior director Investor Relations.

Operator: After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, press the star and then the number one on your telephone keypad. If you would like to withdraw yourself, please press star two. As a reminder, ladies and gentlemen, this conference call is being recorded, and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Mr. Jack Dickens. Please go ahead, sir.

The speaker's remarks, there will be a question and answers period.

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Speaker Change: I'd now like to turn the call over to Mr. Jack Atkins. Please go ahead Sir.

Jack Dickens: Thank you, Natalie. Good morning, everyone, and thank you for joining us on our call. An audio version of this call will be available on our website through May 16th, and a replay link of the webcast will be archived for 90 days. Our comments today will include forward-looking statements based on current expectations. Actual results and events could differ from those statements due to a number of risks and uncertainties which are discussed in our SEC filings. We assume no obligation to update our forward-looking statements. And with that, I'll turn the call over to Ritch.

Jack Dickens: Thank you Natalie and good morning to everyone and thank you for joining our call.

Cardio version of this call will be available on our website through may 16th and a replay link of the webcast will be archived for 90 days.

Jack Dickens: Our comments today will include forward looking statements based on current expectations actual results and events could differ from those statements due to a number of risks and uncertainties, which are discussed in our SEC filings, we assume no obligation to update our forward looking statements.

Jack Dickens: That I will turn the call over to rich.

Richard Joseph Tobin: Thanks Jack. Let's go to slide three. First quarter results were in line with our expectations. Strong performance across several of our end markets, together with improving order and shipment trends and biopharma components and growth platforms, were able to offset the counter-cyclicality in some of our long cycle portfolio in what was expected to be our toughest comparable quarter this year. It is clear that the operating posture that we took in the second half of 2023 to proactively curtail production has had its intended effect.

Rich: Thanks, Jack Let's go to slide three first quarter results were in line with our expectations strong performance across several of our end markets together with improving order and shipment trends in biopharma components and growth platforms, we're able to offset the counter cyclicality and.

Rich: Some of our long cycle portfolio, and what was expected to be our toughest comparable quarter. This year.

Rich: It is clear that our operating posture that we took in the second half of 2023 to proactively curtailed production.

Rich: It's had its intended effect customer and channel inventories are now largely imbalanced with prevailing demand conditions.

Richard Joseph Tobin: Customer and channel inventories are now largely in balance with prevailing demand conditions, and Levelset to normalize lead times. As a result, order momentum in the quarter was strong and broad-based, particularly in our shorter cycle end markets, building off an exit rate from last year and bolstering our confidence in the all-year outlook. We remain active in capital deployment. During the quarter, we closed two synergistic bolt-on acquisitions that add attractive digital and recurring revenue streams to our retail, fueling, and car wash platforms. But the stake of divestiture closed at the end of March as part of our ongoing portfolio evolution.

Rich: And level set to normalize lead times as a result order momentum in the quarter was strong and broad based particularly in our shorter cycle end markets building off of an exit rate from last year and bolstering our confidence full year outlook.

Rich: We remain active on capital deployment during the quarter, we closed two synergistic bolt on acquisitions that add attractive digital and reoccurring revenue streams to our retail fueling and car wash platforms, but the stake or divestiture close at the end of March as part of our ongoing portfolio evolution.

Rich: We also launched a $500 million accelerated share repurchase program at the end of February to return excess capital to our shareholders. Our strong cash flow generation along with the proceeds from that to stake sale provides ample capacity for further capital deployment in 2024.

Rich: We're off to a solid start to the year and the setup for the remainder of the year is encouraging.

Richard Joseph Tobin: We also launched a $500 million accelerated share repurchase program at the end of February to return excess capital to our shareholders. Our strong cash flow generation, along with the proceeds from the Disteco sale, provide ample capacity for further capital deployment in 2024. We're off to a solid start to the year, and the setup for the remainder of the year is encouraging.

Rich: Order rate momentum and healthy underlying demand conditions support the outlook for volume and margin improvement as we progress through the year, we are narrowing our full year adjusted EPS guidance towards the higher end of the range and we'll continue to evaluate our full year targets as the year progresses, especially if demand trend.

Rich: <unk> continue.

Rich: Let's go to slide four.

Rich: For the revenue was up 1% in the quarter bookings were up 3% organically year over year and up 12% sequentially in the quarter, reflecting growing order rate momentum across much of the portfolio of note. After seven quarters of bookings decline as a result of the post Covid backlogs, we have now seen positive bookings growth in two straight quarters.

Rich: And expect this positive trend to continue for the rest of the year segment margins were $19 seven down 30 basis points, we expect to return to positive year over year accretion from.

Richard Joseph Tobin: Our order rate momentum and healthy underlying demand conditions support the outlook for volume and margin improvement as we progress through the year. We are narrowing our full-year adjusted EPS guidance towards the higher end of the range and will continue to evaluate our full-year targets as the year progresses, especially if demand trends continue. Now, let's go to slide four.

Rich: From here on mix and volume leverage adjusted EPS was up $2 95 per share in the quarter and we are guiding.

Rich: 1% to 3% organic revenue growth and adjusted EPS of $9 to $9, 15% 15 cents for.

Rich: For the year 2024, so let's go move onto slide five.

Rich: Engineered products had a robust quarter, particularly strong volume growth.

Rich: And conversion waste handling, which saw which set an all time record for first quarter profits and should continue its positive trajectory.

Richard Joseph Tobin: Before revenue was up 1% in the quarter, bookings were up 3% organically year over year and up 12% sequentially in the quarter, reflecting growing order rate momentum across much of the portfolio. Of note, after seven quarters of bookings decline as a result of the post-COVID backlogs, we have now seen positive bookings growth in two straight quarters and expect this positive trend to continue for the rest of the year. Segment margins were 19.7, down 30 basis points.

Rich: On strong truck body order momentum in software adoption aerospace and defense also posted double digit revenue growth volumes improved in vehicle aftermarket on better end market conditions and bookings growth.

Rich: Including in Europe, we expect volumes volumes to remain strong for the segment throughout 2024.

Rich: Margin performance was solid in the quarter on strong volume conversion price cost dynamics and productivity investments.

Rich: Clean energy and fueling and returned to positive organic growth in the quarter. After nine consecutive quarters of flat to negative top line performance driven by the end of the N V cycle in North America, and channel and channel Destocking and what is most our most.

Rich: Heavy distribution exposed segment.

Rich: Margins were down in the quarter, a negative comparable mix, but we expect to see sequential improvement from here and target full year margins up over 23, driven by attractive volume conversion and the benefits from previously enacted cost control measures.

Richard Joseph Tobin: We expect to return to positive year over year accretion from here on mix and volume leverage. Adjusted EPS was up to $1.95 per share in the quarter. We are guiding 1% to 3% organic revenue growth and adjusted EPS of $9 to $9.15 for the year 2024. So let's move on to slide five.

Rich: Imaging and identification posted a steady quarter with lower printer shipments in Europe, and the U S largely offset by strong volumes in consumables and aftermarket.

Rich: We expect top line to return to growth next quarter and to be up for the year margin performance was exemplary and cost controls and higher mix of consumables and aftermarket shipments.

Rich: Constant process was up organically in the quarter and robust volumes and polymer processing end precision components.

Rich: Order rates for thermal connectors are very encouraging we are pleased to see a bar biopharma shipments grow year over year with orders gaining further momentum with a book to Bill of 1.08 as customer inventories continued to normalize and commercial drug production and new therapy development remain robust.

Richard Joseph Tobin: Engineered products had a robust quarter, particularly strong volume growth, and Conversion Waste Handling, which set an all-time record for first-quarter profits and should continue its positive trajectory based on strong truck body order momentum and software adoption. Aerospace and Defense also posted double-digit revenue growth. Volumes improved in the vehicle aftermarket on better end market conditions and bookings growth, including in Europe. We expect volumes to remain strong for the segment throughout 2024. Margin performance was solid in the quarter on strong volume conversion, price-cost dynamics, and productivity investment.

Rich: I would like to point out that our biopharma business as nearly all consumable and in the post pandemic destocking headwinds dissipate as this is mostly driven by biopharma production volumes, which are growing.

Rich: Margins in this segment were down modestly due to strong volumes in polymer processing, which was slightly dilutive to the consolidated segment margin.

Rich: Order trends can be important trends hold we expect margins positive sequentially from here.

Rich: Top line performance in climate and sustainability technologies was down as expected driven by the expected capital investment slowdown in beverage can making.

Rich: And the impact of Destocking stocking headwinds in the broader HVA C complex, most notably in European residential heat pumps on a Braves plate heat exchanger business. In contrast, our U S. Heat exchanger business continues to grow in double digits on technology share gains in.

Richard Joseph Tobin: Clean energy and fueling return to positive organic growth in the quarter after nine consecutive quarters of flat to negative top-line performance driven by the end of the EMV cycle in North America and channel de-stocking at what is our most. Heavy Distribution Exposed Segment.

Rich: Involving and evolving end market applications, including data centers.

Rich: We expect top line to improve as the year progresses with the easier comparable performance in the second half of the year and supported by strong volume in C. O two refrigeration systems, which drove the bookings growth for the segment on several key customer build out wins.

Richard Joseph Tobin: Margins were down in the quarter on a negative comparable mix, but we expect to see sequential improvement from here and target full year margins up over 23 driven by attractive volume conversion and the benefits from previously enacted cost control measures. Imaging and identification posted a steady quarter with lower printer shipments in Europe and the US, largely offset by strong volumes and consumables in the aftermarket. We expect the top line to return to growth next quarter and to be up for the year.

Rich: I'll pass it onto Brad.

Brad: Thanks, Rich good morning, everyone.

Brad: Let's go to slide seven.

Brad: The top right shows our organic revenue decline of 1%.

Brad: Acquisitions contributed 2% to the top line, while FX was essentially flat the distinguished sale, which closed on March 31.

Brad: Be an offset to acquisition.

Brad: Revenue growth beginning in Q2.

Brad: Total deal costs in the quarter were $3 million or two cents of EPS relating to the sale of the stake go an ongoing deal activity from a geo perspective, the U S. Our largest market was up 1% in the quarter, while Europe and all of Asia were down 1%.

Brad: And 5%, respectively, China, which represents about half of our revenue base in Asia was up 5% organically in the quarter with improving conditions across several end markets.

Brad: On the bottom chart bookings were up year over year and sequentially on strong order momentum as a result of largely normalized chat.

Richard Joseph Tobin: Margin performance was exemplary on cost controls and a higher mix of consumables and aftermarket ships. The process was up organically in the quarter on robust volumes and polymer processing and precision components. Order rates for thermal connectors were very encouraging. We were pleased to see BioPharma shipments grow year over year with orders gaining further momentum with a book-to-bill of 1.08 as customer inventories continue to normalize, and commercial drug production and new therapy development remain robust.

Brad: Channel inventories and lead times.

Brad: Our cash flow statement is on slide eight free.

Brad: Free cash flow for the quarter came in at $122 million or 6% of revenue.

Brad: Q1 comparable performance was impacted by investments in working capital due to the timing of shipments driving higher receivable balances as well investment in inventory ahead of seasonally strong stronger quarters in Q2 and Q3.

Brad: The first quarter is traditionally our lowest cash flow quarter of the year.

Brad: The change in accrued taxes was driven principally by the recording of future tax payments related to this they go divestiture, we plan to adjust these tax payments out of free cash flow reporting as they are non operating in nature in line with the exclusion of the gain on the sale of our adjusted P&L results.

Richard Joseph Tobin: I would like to point out that our BioPharma business is nearly all consumable, and in the post-pandemic destocking headwinds dissipate. This is mostly driven by biopharmaceutical production volumes, which are growing. Margins in the segment were down modestly due to strong volumes in polymer processing, which is slightly dilutive to the consolidated segment margin. However, if order trends hold, we expect margins to be positive sequentially from here. Top-line performance in climate and sustainability technologies was down, as expected, driven by the expected capital investment slowdown in beverage can making and the impact of de-stocking headwinds in the broader HVAC complex, most notably in European residential heat pumps, on our brazed plate heat exchanger business.

Brad: Our forecast for 'twenty 'twenty four free cash flow remains on track between 13, and 50, 15% of revenue I'll turn it back to rich.

Rich: Okay before we go to Q&A I wanted to provide a little bit more color on some of the product lines that help deliver our results this quarter.

Rich: And positioned us to continue growing at a high secular growth rate markets early on we saw significant growth opportunity in each of these markets and proactively invested in Capex and R&D.

Rich: Cultivate technology technological leadership and provided sufficient foundation to win in scale with our customers across these markets. We enjoy leadership positions with strong brand recognition and well entrenched intellectual property protection.

Rich: Each of these end markets have enjoyed double digit growth trajectories over the past five years and the robust booking trends in the first quarter point to these markets remaining meaningful contributor to dover's overall revenue growth profile.

Rich: In total these products deliver attractive margin conversion that is accretive to dover's can sell its consolidated margin.

Rich: And C O two systems were the early mover and transplanting natural refrigerant technology from Europe to the U S will return we enjoy a technological lead and have the largest installed base in food retail applications and the broadest product offering we.

Richard Joseph Tobin: In contrast, our US heat exchanger business continues to grow in double digits on technology share gains and evolving ed market applications, including data centers. We expect top line to improve as the year progresses with easier comparable performance in the second half of the year and supported by strong volume in CO2 refrigeration systems, which drove the bookings growth of the segment on several key customer build-out wins. I'll pass it on to Brad.

Rich: We are proactively expanded our capacity and then invested heavily behind a platform based product strategy supported by a differentiated digital go to market architecture that facilitates the sale and design process reduces complexity improves product quality and delivers best in class lead times.

Rich: And reduces the cost for ourselves and our customers. Our recently launched platforms are gaining traction in the marketplace with several exciting large scale <unk> conversion programs underway at Creek key retailers with a multiyear runway.

Rich: We are also benefiting from our exposure to data centers and the secular growth in infrastructure investment with the significant power requirements of next generation chips that support artificial intelligence adoption are now requiring liquid cooling methods.

Brad M. Cerepak: Thanks, Rich. Good morning, everyone.

Rich: We are exposed to liquid cooling of data centers in both our heat exchanger business, which enables heat transfer within the cooling distribution units and then the connector business, which provides leak free liquid connection points at the server racks and manifolds and now directly to the individual chip cooling cold place.

Brad M. Cerepak: Let's go to slide 7. Top Ridge shows our organic revenue decline of 1%. Acquisitions contributed 2% to the top line, while FX was essentially flat. The Distaco sale, which closed on March 31st, will be an offset to acquisition revenue growth beginning in Q2. Total deal costs in the quarter were $3 million, or $0.02 of EPS relating to the sale of Disteco and ongoing deal activity. From a geographic perspective, the U.S., our largest market, was up 1 percent in the quarter, while Europe and all of Asia were down 1 percent and 5 percent, respectively. China, which represents about half our revenue base in Asia, was up 5 percent organically in the quarter, with improving conditions across several end markets.

Rich: I'll leave the data center infrastructure market forecast to our end customers further down the chain for us it's clear an area of robust growth in the foreseeable future.

Rich: I have evidenced by our recent order trajectory and high profile specification wins with the chip Oems.

Rich: Accordingly, we have proactively installed production capacity and are well positioned to meet any meaningful inflections in demand with industry best lead times.

Rich: The through cycle performance of our Biopharma components platform.

Rich: Has been solid despite the well chronicled post COVID-19 destocking headwinds over the past two years.

Rich: With customer inventory levels now.

Rich: Normalizing the long term tailwind for single use bio processing.

Rich: And cell and gene therapies are compelling and importantly, our products are specified.

Rich: For our regulated manufacturing environment, while our business is still below peak levels. We believe that the recent booking trends and positive tone from our customers and industry partners set up for a potential upside this year.

Rich: Finally, let's go to slide 10 shows our long term performance of our portfolio. Our playbook for earnings accretion remains unchanged to deliver growth through a combination of top line organic growth.

Rich: Earnings accretion through operational execution and returns are productive capital deployment strategy.

Rich: With the start of the year.

Rich: Flexible business model, we will continue to monitor.

Rich: End market conditions quickly respond to changes in the marketplace.

Brad M. Cerepak: On the bottom chart, bookings were up year over year and sequentially on strong order momentum as a result of largely normalized channel inventories and lead times. Our cash flow statement is on slide eight. Pre-cash flow for the quarter came in at $122 million, or 6% of revenue. Comparable performance was impacted by investments in working capital due to the timing of shipments, driving higher receivable balances as well as investment in inventory ahead of seasonally stronger quarters in Q2 and Q3.

Rich: <unk>.

Rich: Yeah.

Rich: At this time, we would like to ask a question simply press Star and then the number one on your telephone keypad. If you would like to withdraw your question. Please press star two.

Rich: Ask that participants limit themselves to one question and one follow up question.

Rich: We will now hear from Mike Halloran with Baird.

Michael Halloran: Please go ahead good morning, good morning.

Michael Halloran: Good morning.

Michael Halloran: Okay. So a couple of questions here first on orders, obviously comps are easier in the next couple of quarters, but maybe just talk a little bit about the underlying perspective from an end market that gets you comfortable with the order commentary for the year I'm, just kind of a confidence in the composition of where that order growth is going to come from from an underlying market perspectives and then related.

Michael Halloran: Do you see orders up sequentially going into the second quarter.

Speaker Change: Yeah I do.

Speaker Change: Look I'd have to go segment by segment, because there are different between the short cycle and.

Brad M. Cerepak: The first quarter is traditionally our lowest cash flow quarter of the year. The change in accrued taxes was driven principally by the recording of future tax payments related to the STACO divestiture. We plan to adjust these tax payments out of free cash flow reporting as they are not operating in nature in line with the exclusion of the gain on the sale of our adjusted P&L results. Our forecast for 2024 free cash flow remains on track between 13% and 15% of revenue. I'll turn it back to Ritch.

Speaker Change: In the longer cycle portions of the portfolio, but orders are.

Speaker Change: Our up broad based with the exception of the two that we highlighted both in can making and in heat exchangers in Europe, we would expect that trend to continue.

Speaker Change: Which supports basically the seasonality we expect some of them.

Speaker Change: Pretty big step up in performance in Q2, and Q3, and we will see about Q4.

Speaker Change: Which will be a dynamic of how the order rates go between now and then I think most importantly, our confidence is based on the fact that of all the hard work. We did in terms of managing inventory through the channel last year and that's allowed.

Speaker Change: Just to have more confidence in terms of the order rates going forward.

Speaker Change: Okay.

Speaker Change: The action ability of the M&A pipeline from your perspective, obviously, the commentary has been pretty positive about your flexibility in the short term here.

Speaker Change: How would you look at that channel as we're sitting here today in the priorities.

Richard Joseph Tobin: Okay, before we go to Q&A, I wanted to provide a little bit more color on some of the product lines that helped deliver our results in the last quarter and positioned us to continue growing in the high secular growth rate markets. Early on, we saw significant growth opportunities in each of these markets and proactively invested in CapEx and R&D to cultivate technological leadership and provide a sufficient foundation to win and scale with our customers.

Speaker Change: Its lucent for sure I think there's a recognition now that interest rates are here to stay.

Speaker Change: That's helpful. I think that the equity markets have rallied quite a bit so I think that this fear of.

Speaker Change: Purchase compression on multiples has gone away, but it's not.

Speaker Change: Flood, yet, but I think that the activity in terms of.

Speaker Change: Opportunities that we can look at is a lot better than it would've been a year ago today.

Speaker Change: Thanks for that appreciate it.

Speaker Change: Thanks.

Speaker Change: And our next question comes from Steve Tusa with Jpmorgan. Please go ahead.

Charles Stephen Tusa: Hey, guys good morning.

Speaker Change: Hi.

Charles Stephen Tusa: So just on the on the orders comment I guess, you said schweppe really isn't isn't.

Charles Stephen Tusa: Picking up is that is that a bit of a reflection of.

Richard Joseph Tobin: Across these markets, we enjoy leadership positions with strong brand recognition and well-entrenched intellectual property protection. Each of these end markets has enjoyed double-digit growth trajectories over the past five years, and the robust booking trends in the first quarter point to these markets remaining a meaningful contributor to Dover's overall revenue growth profile. In total, these products deliver attractive margin conversion that is accretive to Dover's consolidated margin.

Charles Stephen Tusa: The EU heat pump market, that's not really you would you would expect to see it by now if you're if things are turning up there in the second half I think you've said that before.

Speaker Change: I mean, we're running out of time here.

Speaker Change: So our expectation that that market will be clearly down year over year I think that we've got we've brought down even though our internal estimates for this year. So I think.

Speaker Change: And it's probably the one business that is not tracking to what we thought it would have been maybe were a little optimistic.

Speaker Change: But we will see so we would have to see orders bounce back.

Speaker Change: At the end of Q2.

Speaker Change: To support any kind of inflection in the marketplace in the second half right. So like so like a solid double digit first half to second half like the way you will see orders today that that doesn't sound right.

Richard Joseph Tobin: In CO2 systems, we are an early mover in transplanting natural refrigeration technology from Europe to the U.S., where we currently enjoy a technological lead and have the largest installed base in food retail applications and the broadest product offering. We have proactively expanded our capacity and invested heavily in a platform-based product strategy supported by a differentiated digital go-to-market architecture that facilitates the sales and design process, reduces complexity, improves product quality, and delivers best-in-class lead times and reduces costs for ourselves and our customers.

Speaker Change: Yeah, I mean I have to go back and look at the comps, but if you remember I mean sequential and year with sequential sequential sequentially.

Speaker Change: Sequentially, yes.

Speaker Change: Don't see that as being.

Speaker Change: Embedded in your current forecasts now given you aren't seeing the orders that making sure okay.

Speaker Change: Yep.

Speaker Change: And then just could you help calibrate us just on and on an EPS basis for the second quarter. However, you want to have you want to talk about it I mean, it looks like that the orders are running right now ahead of.

Speaker Change: The sales forecast that are out there your orders are going to be up sequentially. So I mean like you look like you're covered from an orders perspective any further color on the seasonality of EPS for QQ anything that influences margins in a major way or anything like that because the sales look like they're going to be okay relative taken.

Speaker Change: Santos.

Santos: Thanks Eddie.

Speaker Change: Any change.

Speaker Change: Okay. So what is it usually sequentially or percentage of the year maybe.

Speaker Change: Maybe Brad.

Speaker Change: I think the whole season.

Speaker Change: [laughter] right.

Speaker Change: I know you wouldn't want to add to that so I'll go I'll go to Brad.

Speaker Change: [laughter], Brad left Brad left the room sorry.

Speaker Change: I think that the.

Brad: Seasonality that we would expect is where we're tracking right now so Q2 Q3 up and then we'll leave some optionality in Q4 and that will back to your question that order rates Q4, it'll be depending on how we track. So there is potential upside in Q4, if order rates continue to build yeah.

Richard Joseph Tobin: Our recently launched platforms are gaining traction in the marketplace with several exciting large-scale CO2 conversion programs underway at key retailers with a multi-year runway. We are also benefiting from our exposure to data centers and the secular growth in infrastructure investment. The significant power requirements of next-generation chips that support artificial intelligence adoption are now requiring liquid cooling methods. We are exposed to liquid cooling of data centers in both our heat exchanger business, which enables heat transfer within the cooling distribution units, and in the connector business, which provides leak-free liquid connection points at the server racks and manifolds and now directly to the individual chip cooling cold place.

Brad: There's a new there's a nuance on order rates because the state goes now out of our order book.

Speaker Change: And Jack could take you through that but we still see sequential up even covering to state go into second quarter and through the year. So like so like $2 25 ish for Q2 is that sound about right.

Jack: [laughter] no we don't give quarterly.

Jack: Guidance right.

Speaker Change: Alright any of them that was a good one Steve no now that said I guess I'll ask Jack offline.

Speaker Change: Right.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: And our next question comes from Julian Mitchell with Barclays. Please go ahead.

Julian Mitchell: Hi, good morning.

Julian Mitchell: Maybe I just wanted to start off with the D. C. S T.

Speaker Change: Segment.

Julian Mitchell: Price down a little bit year on year.

Julian Mitchell: Just kind of a mix thing and then it comes back.

Julian Mitchell: Later in the year and on the margin front for D. C. S T.

Richard Joseph Tobin: I'll leave the data center infrastructure market forecast to our end customers further down the chain. For us, it's clear an area of robust growth in the foreseeable future, as evidenced by our recent order trajectory and high-profile specification wins with the CHIP OEMs. Importantly, we have proactively installed production capacity and are well-positioned to meet any meaningful inflections in demand with industry-best lead times, through cycle performance, or a biopharma components platform has been solid despite the well-chronicled post-COVID destocking headwinds over the past two years. With customer inventory levels now normalizing, the long-term tailwinds for single-use bioprocessing are positive. Cell and gene therapies are compelling, and importantly, our products are specified for a regulated manufacturing environment.

Julian Mitchell: 14% first quarter.

Julian Mitchell: Do we just assume a sort of steady sequential ramp from that point through the year.

Julian Mitchell:

Julian Mitchell: I think it's I think it's because of the effect of the negative effect on the heat exchanger business, which is accretive to that segment.

Julian Mitchell: The ramp is going to be very much predicated upon how much C O two.

Julian Mitchell: System volume, we can get out between now and the end of the year. So I guess to answer. Your question is it will ramp, but you need to take into account when youre looking at comps that until we get into the back half of next year, we're going to be pushing up against the reduced volume and heat exchangers.

Julian Mitchell: Yes.

Speaker Change: Got it and on the pricing I think it was down just a little bit in Q1, and this is sort of anything to call out.

Speaker Change: That does it flip back to positive later in the year.

Speaker Change: Yeah, I think that's a niche to be honest with you I mean, the pricing that we have out there is relatively hold its got to be more mix related than anything else.

Speaker Change: That's helpful and then just a follow up.

Speaker Change: Sort of more broadly when youre looking at your.

Speaker Change: Customers and then realize there's a breadth of end market exposures, but you know.

Richard Joseph Tobin: While our business is still below peak levels, we believe the recent booking trends and positive tone from our customers and industry partners set us up for a potential upside this year. Finally, let's go to slide 10, which shows the long-term performance of our portfolio. Our playbook for earnings increases remains unchanged: to deliver growth through a combination of top-line organic growth, Earnings Accretion through Operational Execution, and Returns of Productive Capital Deployment Strategy. We are pleased with the start of the year and our flexible business model. We will continue to monitor any end market conditions and will quickly respond to changes in the marketplace.

Speaker Change: Is it your perspective for your products to channel partners and your customers sort of inventories are pretty high.

Speaker Change: Lee now for where we are in the year any concerns around further need for inventory reduction or do you think we start to move the other way and you know when Youre looking at how your channel partners are behaving based on orders and so forth.

Speaker Change: Yeah.

Speaker Change: The portions of the business.

Speaker Change: That our distribution, we don't see a build we just see pass through right. Now. So one would hope can we get a little bit of build but that'll be that'll be dependent on what we see on pull through demand from here. So.

Speaker Change: We've talked about this quite a bit Julien I mean, we did a lot of work and took proactive work in the second half of the year, our distribution channel checks don't show build we just see pass through right now so it's not going to be a headwind hopefully.

Operator: At this time, if you would like to ask a question, simply press star and then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. We ask that participants limit themselves to one question and one follow-up question. We will now hear from Mychaloran and Baird.

Speaker Change: If demand continues to inflect positively there will be a little bit of a tailwind.

Julien: That's great. Thank you.

Julien: Yep.

Julien: Yeah.

Speaker Change: And our next question comes from Brett Linzey with Mizuho. Please go ahead.

Speaker Change: Yeah.

Brett Logan Linzey: Hey, good morning, all.

Brett Logan Linzey: Goodbye.

Brett Logan Linzey: Wanted to come back to Biopharma, you noted some potential upside moving through the year. It does sound like customer tone has improved there.

Brett Logan Linzey: Maybe you could just talk about some of the the warranty expirations in and some of the obsolescence and some of that single use channel inventory there could be a multiplier effect for that business.

Brett Logan Linzey: It's all done now right. If he went back and look sequentially at the Biopharma business, where shipments are heavy that where we've lapped kind of that.

Michael Halloran: Good morning, everyone. Good morning.

Richard Joseph Tobin: Okay, so a couple questions here. First on orders, obviously comps are easy for the next couple quarters, but maybe just talk a little bit about the underlying perspective from an end market that gets you comfortable with the order commentary for the year, which is kind of the confidence and the composition of where that order growth is going to come from, from an underlying market perspective. And then related, do you see orders up sequentially going into the second quarter?

Brett Logan Linzey: Two and a half three year timeline now so.

Brett Logan Linzey: There are still pockets of inventory out there.

Brett Logan Linzey: And the system builds are relatively a headwind right now, but on kind of the processing side of the business is what is inflicting forward. So we expect orders to be up from here just because of the fact that the inventory has been cleared one way or another over the last 36 months.

Speaker Change: Alright, great and then maybe shifting over to thermal connectors doubling of bookings.

Speaker Change: What do you think the revenue run rate is in that business by year end and I guess is there any reason why this business in those applications should be growing in line with some of the liquid cooling adoption trends.

Speaker Change: That's what we hope I think it's you know I'm not going to size. It for you right now because of the competitive aspect of the of the end market. What I can tell you is.

Richard Joseph Tobin: Yeah, I do. Look, we'd have to go segment by segment because they're different between the short cycle and the longer cycle portions of the portfolio. But orders are up broadly, with the exception of the two that we highlighted both in can making and in heat exchanges. We'd expect that trend to continue, which supports the seasonality. Basically, we expect some pretty big steps up in performance in Q2 and Q3, and we'll see about Q4, which will be a dynamic of how the order rates go between now and then.

Speaker Change: <unk> good about where we are positioned positioned from a spec point of view.

Speaker Change: I think that we're gonna be a little bit of a trailer because were sub component behind a lot of the builder that's going out right now.

Speaker Change: But what I can also tell you is we have prebuilt the production capacity that if it was to inflect kind of like what we saw in Biopharma.

Speaker Change: We're gonna be able to be there with industry, leading lead times.

Speaker Change: Thanks for the insight.

Speaker Change: Our next question comes from Joe Ritchie with Goldman Sachs.

Joseph Alfred Ritchie: Hi, Thanks, Good morning, good morning, guys.

Joseph Alfred Ritchie: So so maybe sticking on that slide nine.

Joseph Alfred Ritchie: I didn't actually get to Kansas.

Joseph Alfred Ritchie: Your thermal connect various out of your customers, where we're showing them off of data center world in a couple of weeks ago.

Richard Joseph Tobin: I think most importantly, our confidence is based on the fact that all the hard work we did in terms of managing inventory through the channel last year, and that's allowed us to have more confidence in terms of order rates going forward.

Joseph Alfred Ritchie: But my question is really.

Joseph Alfred Ritchie: On the <unk> system.

Joseph Alfred Ritchie: Rich.

Joseph Alfred Ritchie: Far along do you think we are in terms of these regulatory tailwind, helping this business and maybe just kind of maybe talk a little bit about what the path the path from here.

Richard Joseph Tobin: Um, it's loosened up, for sure.

Richard Joseph Tobin: of Purchase Compression on Multiples has gone away, but it's not a flood yet, but I think that the activity in terms of opportunities that we can look at is a lot better than it would have been a year ago.

Speaker Change: Okay. We we are shipping our first platform.

Speaker Change: We're going to be launching our second platform in the next couple of months.

Speaker Change: And then sequentially after that the the third platform will be launched.

Speaker Change: After that what we have right now.

Operator: And our next question comes from Steve Tessa with J.P. Morgan. Please go ahead.

Speaker Change: As early adopters. So there are certain retail clients that because of ESG reasons in a variety of other reasons have chosen to be an early adopter in this space and not wait for the regulatory aspect of it.

Steve Tessa: at the end of Q2.

Richard Joseph Tobin: Keep in mind, there's a nuance on order rates because the state is now out of our order book.

Speaker Change: And then we've got a lot of customers that are buying individual units test them out. So I think we're in we're in the early innings here.

Steve Tessa: So like 225-ish for 2Q. Does that sound about right?

Steve Tessa: Maybe I just wanted to start off with the DCST segment. So I think price down a little bit year on year, you know, was that just kind of a mixed thing and then it comes back later in the year? And on the margin front for DCST, you know, 14% first quarter, do we just assume a sort of steady sequential ramp from that point through the year?

Speaker Change: <unk>.

Speaker Change: We like the trajectory.

Speaker Change: Okay Cool no that's great to hear and then.

Speaker Change: And then like you guys had referenced this biopharma team.

Speaker Change: Seems like we're starting to see some green shoots here I'm, just curious as you're kind of thinking through that the margin trajectory for that business going forward, maybe just kind of help us with what the path from here.

Speaker Change: It's mix Joe.

Speaker Change: So as the revenue climbs the margin mix is important to the segment.

Richard Joseph Tobin: I think it's because of the negative effect on the heat exchanger business, which is accretive to that segment.

Joseph Alfred Ritchie: Yeah, and a way to look at it frankly is to go.

Joseph Alfred Ritchie: Look back a couple of years of at the margin that we were at and what do we actually didn't decline that much in consolidation.

Steve Tessa: That's great. Thank you.

Steve Tessa: Good night. Thanks. Hey. Yeah.

Richard Joseph Tobin: Wanted to come back to biopharma. You noted some potential upside moving through the year. Does sound like customer tone has improved there. Maybe you could just talk about some of the warranty expirations and some of the obsolescence of some of that single-use channel inventory that could be a multiplier effect for that business.

Joseph Alfred Ritchie: The balance of the segment portfolio actually performed quite well so I wouldn't think about it in terms of incremental leverage on a unit basis I would look at it more as the revenue climes. This segment mixes up from there.

Joseph Alfred Ritchie: Yeah.

Speaker Change: Yeah, and maybe just a quick follow up there who are we at a bottom then in margins for that business do you expect it to improve from here.

Speaker Change: Any way we.

Speaker Change: We never really gave up any margin in the business. What we gave up was volume. So like I said, it's not a business that you would look at <unk> and incremental margins, it's just mix up mix down as a proportion of revenue.

Richard Joseph Tobin: It's all done now, right? If you went back and looked sequentially at the biopharma business, where the shipments are heavy, that's where we've laped, kind of.

Speaker Change: Got it okay, great. Thanks, guys.

Speaker Change: Thanks.

Speaker Change: And our next question comes from Andy Kaplowitz from Citigroup. Please go ahead.

Andrew Kaplowitz: Good morning, everyone.

Andrew Kaplowitz: Hi, Andy.

Andrew Kaplowitz: Maybe just thinking about the segment level organic growth versus your own expectations. It seems relatively clear the D. P should continue to be dover's best growth and 24 D. C. S. T is the weakest, but if you look at the other segments. How are you thinking about growth versus that 1% to 3% guide for the company and were there any surprises versus your own expectations in Q1.

Richard Joseph Tobin: feel good about where we are positioned from a strategic point of view?

Operator: Thanks. Good morning. Good morning, guys.

Operator: And so, maybe sticking on that slide nine, I did actually get a chance to see some of your thermal connectors; your customers were showing them off at Data Center World a couple weeks ago. But my question is really about the CO2 systems. Like, Rich, how far along do you think we are in terms of these regulatory tailwinds that are helping this business? And maybe just kind of talk a little bit about the path from here.

Speaker Change: Okay.

Speaker Change: Okay, Let me think about it I think that.

Speaker Change: As I mentioned earlier the only.

Speaker Change: Business that is performing well.

Speaker Change: Worse than what was baked into our original forecast.

Speaker Change: Is the heat exchanger business in Europe.

Speaker Change: For heat pumps, which is about <unk>.

Speaker Change: On our last year basis about 30% of our revenue. So we're gonna have to mop up.

Speaker Change: Some of that now.

Speaker Change: Now what we have will have offsetting that.

Richard Joseph Tobin: We're going to be launching our second platform in the next couple months.

Speaker Change: <unk> is C O two right and so I just answered <unk> questions about the trajectory of the market and to the extent that the demand continues.

Operator: Okay, cool. No, that's great to hear. And then, look, you guys have referenced this, you know, biopharma, seems like we're starting to see some green shoots here. I'm just curious, as you're kind of thinking through the margin trajectory for that business going forward, maybe just kind of help us with the path from here. Yeah.

Speaker Change: To be solid we should be able to mop up some of that decline in <unk>. It was always baked into our forecast so.

Speaker Change: We don't think that we posted top line growth in that particular segment until Bell Vac, just basically bottoms from there and then wed expect to inflect positively.

Speaker Change: Hopefully in Q4.

Speaker Change:

Speaker Change: Depending on Seo to demand the balance of the businesses are tracking.

Speaker Change: By and large exactly where we had forecasted.

Speaker Change: So they really.

Speaker Change: Going into the quarter, because I think I mentioned that when we did the full year results. It was all about order momentum.

Speaker Change: And so far so good.

Richard Joseph Tobin: Look back a couple years at the margin that we were at, and we actually didn't decline that much in consolidation because the balance of the segment portfolio actually performed quite well. So I wouldn't think about it in terms of incremental leverage on a unit basis. I would look at it more as revenue climbs and the segment mixes.

Speaker Change: That's helpful. And then rich maybe just on D. C. S gives a little more color into the comment you made about margin up for the year. After that Q1 start I know you do have that cost out program. So how does that slow and through the year and help you you know get to where you want to be.

Rich: Look I mean, I think from a from a margin heavy lifting point of view I think that's where we've got to do the most work.

Rich: I think the management team is on it so you've seen us take some structural costs out of that business.

Speaker Change: But do you need to understand is that business is from a proportion point of view that the one that's most exposed to distribution.

Richard Joseph Tobin: Yeah, and maybe just a quick follow-up there. So are we at the bottom then in margins for that business, expected to improve from here? We, we never really gave up any margin in the business. What we gave up was volume. So it's like I said, it's not a business that you would look at decremental and incremental margins. It's just mix up mix down as a proportion of revenue.

Speaker Change: Right. So it's had a pretty good headwind during the let's call. It a destocking phase of 2023. So it should read that was a business that we can look to that says okay incremental margins should be positive as volume flexes upward.

Speaker Change: Helpful. Thank you.

Speaker Change: Thanks.

Speaker Change: Our next question comes from Andrew <unk> with Bank of America. Please go ahead.

Speaker Change: Hi, This is David Ridley Lane on for Andrew Open.

Speaker Change: Well, it's a little bit of a.

Speaker Change: Bigger picture question here, so you're seeing broad based orders improvement manufacturing PMI back above 50.

Operator: And our next question comes from Andy Kaplowitz from Citigroup. Please go ahead.

Speaker Change: You know if you had to.

Speaker Change: Take a cut at looking back.

Speaker Change: Right.

Speaker Change: Was there actual underlying demand weakness last year.

Andrew Kaplowitz: As I mentioned earlier, the only I don't think that we'll post top-line growth in that particular segment until BELVAC just basically bottoms from there and that we'd expect to inflect positively, by and large, exactly where we had forecasted.

Speaker Change: Or was it all just a destocking and a function of comps.

Speaker Change: E. R. Do you think the underlying trend is getting demand trend is getting better now.

Speaker Change: Yeah.

Speaker Change: The demand trend has been getting better now because of the headwind from destocking in the previous comps.

Speaker Change: And then after that then you get to idiosyncratic.

Speaker Change: Product lines and business in geographies, but if you want a macro comment right and I think we addressed that last year is even if you look back two years.

Richard Joseph Tobin: That's helpful. And then Rich, maybe just on DCES, you could give a little more color on the comment you made about margin going up for the year after that Q1 start. I know you do have that cost out program, so how does that flow in through the year and help you, you know, get to where you want to be?

Speaker Change: Unitary demand was relatively flat right. There was a lot of pricing flowing through the marketplace, but the unitary demand was relatively flat and then because of interest rates you had a negative headwind last year.

Speaker Change: In terms of Destocking, so going into this year.

Richard Joseph Tobin: Um, look, I mean, from a margin heavy lifting point of view, I think that's where we've got to do the most work. I think the management team is on it. So you've seen us take some structural costs out of that business. But what you need to understand is that business is, from a proportion point of view, the one that's most exposed to distribution.

Speaker Change: You know thinking positively, let's say that.

Speaker Change: They will see about unitary demand year over year, whether it and flex up but when we know categorically is is that you don't have the headwind from Destocking down right because it's just pass through.

Speaker Change: And then.

Speaker Change: Just a quick housekeeping question.

Speaker Change: What is the share count and effective tax rate assumption embedded in the 2024 EPS guide.

Speaker Change: You can call Jack about that it looks like it into I'm not going to page through all of these documents.

Richard Joseph Tobin: Helpful, thank you.

Speaker Change: Thank you.

Speaker Change: Thanks.

Operator: Our next question comes from Andrew Obin with Bank of America. Please go ahead.

Speaker Change: Our next question comes from Jeff Sprague with vertical research partners. Please go ahead.

Jeffrey Todd Sprague: Hey, Thank you good morning, everyone.

David Emerson Ridley: This is David Ridley Lane on for Andrew Obin. A little bit of a bigger picture question here. So you're seeing broad-based orders improvement, manufacturing PMI back above 50. But if you had to take a cut at looking back, right? Was there actual underlying demand weakness last year?

Jeffrey Todd Sprague: Hey, Rich you would hey, how's it going.

Jeffrey Todd Sprague: Dress kind of your view on what's going on in distribution do you have.

Jeffrey Todd Sprague: And have a view on what's going on with the OEM customers like if we think about Europe heat pumps do you know one way or the other you know if they actually are sitting on inventory of your product or Youre, just really kind of waiting for the order for a kind of a view of what the underlying demand might be.

Jeffrey Todd Sprague: So pumps.

Jeffrey Todd Sprague: Stands out, but maybe theres, some others, where that's kind of a question also.

Jeffrey Todd Sprague: They are clearly sitting on our product inventory.

Jeffrey Todd Sprague: You got kind of like you've got the market going down and then you've got you've got inventory with because we're a sub component with our partners sell.

Richard Joseph Tobin: The demand trend is getting better now because of the headwind from de-stocking in the previous comps. Unitary demand was relatively flat, right? There was a lot of pricing flowing through the marketplace, but unitary demand was relatively flat. And then, because of interest rates, you had a negative headwind last year in terms of de-stocking. So going into this year, you're

Jeffrey Todd Sprague: We're going to go down first I guess is what I'm, saying, we went up first as when pull through demand goes up and everybody kind of puts inventory.

Jeffrey Todd Sprague: To allow for their estimates on the builds and now you've got the market turning lower and so that inventory that's out there. It's got to get depleted. So our expectation is is that our demand will inflect up before the end market demand kind of bottoms.

Speaker Change: Mhm, Yeah that makes sense and then on the liquid cooling stuff.

Speaker Change: You know theres, a number of competitors and the like and I don't expect you to name names, but.

Richard Joseph Tobin: You know, you can call Jack about that. Let's not get into... I'm not going to page through all these documents.

Speaker Change: Do you have more than one or two.

Speaker Change: Cooling related customers in this market and.

Speaker Change: You had also.

Speaker Change: Indicated they were specified by the chip Oems not to parse words, but I just wondering if that was it.

Operator: Our next question comes from Jeff Sprague.

Speaker Change: Kind of a Miss speaking and you actually specified by the cooling HVAC related companies just curious on that detail. Thank you.

Jeffrey Todd Sprague: Thank you. Good morning, everyone.

Richard Joseph Tobin: They're clearly sitting on our product in inventory. So you've got kind of like, you've got the market going down. And then you've got in you've got inventory with because we're a subcomponent with our partners. So, we're going to go down first, I guess that's what I'm saying. We went up first because when pull-through demand goes up, and everybody kind of puts inventory in to allow for their estimates on the builds, and now you've got the market turning lower, and so that inventory that's out there has got to get depleted, so our expectation is that our demand will inflect up before the end market demand kind of bottoms.

Speaker Change: I'm not it wasn't a misspeaking.

Speaker Change: It depends.

Speaker Change: On the chip and it depends on the customer in terms of how.

Speaker Change: Without getting into the details about it you do need to get.

Speaker Change: Specified by the Chipmaker, who makes recommendations to the builder.

Speaker Change: So.

Speaker Change: We did the hard work in getting specified at the up end, but clearly we're going to have to sell into the builder channel.

Speaker Change: <unk> will be our customers as as those units are built.

Speaker Change: And it's more than a more customers that I can count on one hand or no.

Speaker Change: Apparently everybody's in the space, including Us.

Speaker Change: What I can tell you is it's a it's a unique product number one and number two that.

Speaker Change: The production requirements look very much like pharma.

Speaker Change: That is good for us because we're basically building.

Speaker Change: These products and not the same facility, we've got a dedicated facility for these products, but we're going to run it more or less the way we run our connector business for Biopharma. So I think we're in good shape from an IP point of view and we are in good shape in terms of production capacity.

Richard Joseph Tobin: Without getting into the details about it, you do need to get... specified by the chip maker who makes recommendations to the builder, right? So.

Speaker Change: Great Thanks for that color.

Speaker Change: Thanks.

Speaker Change: Our next question comes from Scott Davis.

Scott Reed Davis: Research. Please go ahead.

Scott Reed Davis: Hey, good morning, Rich and Brad.

Scott Reed Davis: Uh huh.

Scott Reed Davis: Sure.

Richard Joseph Tobin: It's a, it's. The production requirements look very much like pharma, and that is good for us because we're basically building these products in not the same facility. We've got a dedicated facility for these products, but we're going to run it more or less the way we run our connector business for biopharma. So I think we're in good shape from an intellectual property point of view, and we're in good shape in terms of production capacity. Great, thanks for that color!

Scott Reed Davis: Hey, guys, you were probably a little bit more skeptical than some of the others.

Scott Reed Davis: And 24 on kind of price and ability to get more price.

Scott Reed Davis: Can we mark to market that a little bit here in April.

Scott Reed Davis: Have you been able to be a little bit more successful it's priced than perhaps you may have thought.

Speaker Change: Alright, I think that we're not going to be negative on price for sure I would expect us to be positive to price by the end of the year I just think that the.

Speaker Change: During supply chain issues and everything else there was a little bit of salad days and price passing going on.

Operator: All right, Scott.

Speaker Change: And and we Werent the big winners there to be perfectly Frank if you go back and look at our price realization through that period.

Scott Reed Davis: And we weren't the big winners there, to be perfectly frank, if you go back and look at our price realization through that period. Arguably, we should have taken more, but at the end of the day, to me, that's more of a non-headwind going forward because, you know, all that capacity got built out if market demand is good, but it's not exactly robust.

Speaker Change: Arguably we should have taken more but at the end of the day.

Speaker Change: To me that's more of a <unk>.

Speaker Change: Non of headwind going for going forward, because all that capacity got built out if market demand is good but it's not exactly robust.

Speaker Change: I don't think there were I think that we're positioned appropriately that we're not going to have to give back price because there's been a lot of price stack over the last 36 months.

Richard Joseph Tobin: Yeah, makes sense. And Rich, totally switching gears, but are you happy with the portfolio you have? It's just, it's very broad, so there's got to be good and bad, but, you know, the opposite of an expensive M&A market is, you know, the opportunity to sell things perhaps at above market value, so are there parts of the portfolio that you think make sense to look at departing with?

Speaker Change: Yes makes sense.

Speaker Change: And rich totally switching gears, but are you happy with the portfolio you have it's just it's very broad so there's got to be good and bad but.

Speaker Change: The opposite of a expensive M&A market as you know.

Speaker Change: The opportunity to sell things, perhaps at above market value. So is there.

Speaker Change: Is there are parts of the portfolio that you think are.

Speaker Change: Makes sense to look at the parting with.

Speaker Change: How do I want to answer that I know that I'm on the clock right could you give me 12 months.

Scott Reed Davis: This is the first part of the question. The second part of the question, Scott, is:

Speaker Change: They go is a good example, right because that's a business that we looked at in terms of of end market exposure and where we had taken it to from a margin point of view, we found a partner we monetize that I think at a multiple that to stakeholders not trading within the Dover portfolio. So.

Richard Joseph Tobin: If we go back to 1819, when we said that we were not just going to go around selling stuff around here to dress up margin expansion, that's easy to do at the end of the day. But I don't think it's creating shareholder value. It's just creating optics.

Speaker Change: Think that that Optionality remains on other pieces in the portfolio, but you need to find.

Speaker Change: Willing partners and alike.

Speaker Change: As the first part of the question the second part of the question Scott is.

Speaker Change: If we go back to 18 19 that we said that we were not just going to go around selling stuff around here to dress up margin expansion, that's easy to do at the end of the day, but I don't think it's creating shareholder value, it's just creating optics.

Richard Joseph Tobin: We've moved up the margin here substantially, right? So I think that, unlike 18 and 19, if we were to monetize pieces of the portfolio, we're going to get a lot more than we would have back then, to the extent that we can find a willing partner there. So, I understand that the complexity of the portfolio is a difficult issue from a thematic point of view, but I'm not going to apologize for the value creation that we've been able to extract from the portfolio. So we'll just retain that optionality going forward.

Speaker Change: We've moved up the margin here substantially right. So I think that unlike 18 and 19, if we were to monetize pieces of the portfolio, we're going to get a lot more than we would have.

Speaker Change: Then back then to the extent that we can find a willing partner there so.

Speaker Change: I understand that this the complexity of the portfolio is a difficult issue from a thematic point of view.

Speaker Change: But I'm not going to apologize for the value creation of that we've been able to extract in the portfolio. So it will just retain that optionality going forward.

Speaker Change: The answer thank you best of luck guys. Thanks. Thanks.

Speaker Change: Our next question comes from Joe O'dea with Wells Fargo. Please go ahead.

Scott Reed Davis: That's a good answer. Thank you. Best of luck, guys.

Joseph Alfred Ritchie: Hi, good morning, Thanks for taking my questions.

Operator: Our next question comes from Joe O'Dea with Wells Fargo. Please go ahead.

Joseph Alfred Ritchie: Rich I wanted to ask about the climate orders in the quarter.

Joseph Alfred Ritchie: Pretty notable step up in and well above each quarter of 2023, so just trying to understand a little bit more.

Joseph Alfred Ritchie: Hi, good morning. Thanks for taking my questions. Rich, I wanted to ask about the climate orders in the quarter. A pretty notable step up and well above each quarter of 2023. So just trying to understand a little bit more what happened in Q1 versus every quarter of 2023 that brought customers forward. It sounds like what you saw in terms of order levels in Q1 is more of a sustainable level moving forward. So just kind of the catalyst behind that switch from a calendar flip and much stronger demand. Well, when you're taking...

Joseph Alfred Ritchie: What happened in Q1 versus every quarter of 2023 broad sort of customers forward. It sounds like what you saw in terms of order levels. In Q1 is more of a sustainable level moving forward.

Joseph Alfred Ritchie: So just kind of the catalyst behind that switch from a calendar flip and much stronger demand.

Speaker Change: Well when you take into account that our orders are dropping in heat exchangers and down.

Speaker Change: I think maybe not down at bell that because <unk> built that backlog several years ago, but down in heat exchangers.

Speaker Change: The order rate is exclusively in the fact that we are launching a new product line and <unk> systems.

Joseph Alfred Ritchie: Yeah.

Joseph Alfred Ritchie: So thats whats different but you wouldn't call that lumpy and I think Q1 is like lumpy, it's like they're sustainable demand at that level and climate look I mean is there they are going to continue.

Joseph Alfred Ritchie: Well C. O two is going to continue to offset these key exchanger business now the heat exchanger business has easier comps once we get beyond August because I think that inflicted down in September of last year.

Joseph Alfred Ritchie: So it may be a little bit of put and take between now and then because in <unk> systems, we tend to get large orders every once in a while to flex it up and down.

Richard Joseph Tobin: Well, when you take into account that our orders are dropping for heat exchangers and down... The order rate is exclusively due to the fact that we're launching a new product line of CO2 systems.

Joseph Alfred Ritchie: But over time.

Joseph Alfred Ritchie: I think that order rates.

Joseph Alfred Ritchie: Should look good.

Joseph Alfred Ritchie: From the half year going forward.

Speaker Change: For sure.

Speaker Change: Got it.

Speaker Change: And then just circling back to David's question, making sure I kind of understand the takeaway.

Richard Joseph Tobin: Heat exchanger business should look good from the half year going forward, for sure.

Speaker Change: It sounds like.

Speaker Change: What youre seeing in order levels is really a reflection of what you see for sell through demand.

Richard Joseph Tobin: sort of working through the end of D-stock. And this is just reflective of sell-through demand. It's not saying that sequentially from, say, 3Q to 4Q to 1Q, the demand environment has really gotten better. It's really.

Speaker Change: Yeah.

Speaker Change: Sort of working through the end of destock and this is just reflective of sell through and demand, it's not saying that sequentially from say <unk>. The demand environment has really gotten better. It's really just that's just the absence of the pressure that we saw on channel reductions.

Joseph Alfred Ritchie: That's it, right? Because if we go back last year and the decline in revenue, that wasn't a reflection of pull-through demand because it had the headwind of destocking. Now what you have is just basically, let's just call it pass through. So we don't see stocking; we just see it passing. Thanks.

Speaker Change: Right.

Speaker Change: That's it.

Speaker Change: Because if we go back last year and the decline in revenue.

Speaker Change: That wasn't.

Speaker Change: A reflection of pull through demand because it had the headwinds of Destocking now what you have is just basically let's just call it pass through.

Speaker Change: So I don't think stocking, we just see it pass them. Thanks.

Speaker Change: Yes.

Operator: Our last question comes from Deane Dray with RBC Capital Markets. Please go ahead.

Speaker Change: Our last question comes from Deane Dray with RBC capital markets. Please go ahead.

Deane Michael Dray: Thank you. Good morning, everyone. Morning. Hey, can we get on imaging just the state of the world in consumer packaged goods? It sounded like that business is beginning to see some normal demand. But what have you guys?

Deane Michael Dray: Thank you good morning, everyone.

Deane Michael Dray: Good morning, Hi, Dan Hey, can we get an imaging just the.

Deane Michael Dray: The state of the world and consumer packaged goods. It sounded like that business is beginning to also see some normal demand, but what did you guys have been seeing.

Richard Joseph Tobin: It's stable, Deane. You know, you have some inflection up and down between the equipment side. But the consumable portion is generally a steady eddy. It doesn't flex up or down.

Deane Michael Dray: It's stable theme.

Dan: You know you have some inflection up and down when between the equipment side that the.

Deane Michael Dray: <unk>.

Deane Michael Dray: The consumable portion is generally a steady eddy it doesn't flex up or down do you have a little bit of price that goes through every year.

Richard Joseph Tobin: You have a little bit of price that goes through every year. I wouldn't be too concerned about quarter-to-quarter movements because they don't tend to be very high at the end of the day, and there's a lot of FX rolling through there just because of the fact that it is truly, I think, the only real, true global business that we have. So it's steady, right? We don't see an inflection point in terms of production rates and consumer products. You know, China seems to be, which was a headwind next year, seems to be sequentially improving. So we'll see from there. But it does run up against a strengthening dollar.

Deane Michael Dray: I wouldn't be too concerned on quarter to quarter movements, because they don't tend to be very high at the end of the day and there's a lot of FX rolling through there just because of the fact that it is truly <unk>.

Deane Michael Dray: The only real true global business that we have so it's steady right and we don't see an inflection up in terms of production rates and consumer products.

Deane Michael Dray: China seems to be which was a headwind next year seems to sequentially be improving sell we'll see from there.

Deane Michael Dray: But it does run up against a strengthening dollar.

Deane Michael Dray: Okay. And then just a couple of cleanup questions on the data center discussions during this call. The first is, I know you've got lots of headaches with Schwepp heat exchangers. But what about Schwepp in data centers in Europe? I know you were highlighting the US, but where's Schwepp in data centers in Europe? And then on the connectors, are you being asked to bid on these projects for the chip makers, or are you being, is it negotiated design? Because that's a big differentiator.

Speaker Change: Understood and then just a couple of clean up questions on the data center discussions on this call.

Speaker Change: The first is I know, you've got lots of headaches with Schweppe heat exchangers.

Speaker Change: What about swept in data centers in Europe, I know you were highlighted in the U S, but whereas schweppe in data centers in Europe, and then on the connectors.

Deane Michael Dray: Connectors are you being asked to bid on these projects for the chip makers or are you being is it a negotiated design and because that's a big differentiator.

Richard Joseph Tobin: Let me take the last question first. It's design-in. I'm sure that our commercial teams will say it's not that easy, but the fact of the matter is it's design-in, predominantly. Now, there will be a variety of different negotiations with the participants that are building out the infrastructure. But, you know, the most important part, it's kind of win the spec business early on, and then we see where we go from there. Data centers in Europe, I'm going to have to get back to you. I don't think it's meaningful. I think that the data center activity that we see is more North American-based. That's a real help.

Deane Michael Dray: Now let me take the last question first it's design in.

Deane Michael Dray: I'm sure that the commercial our commercial team is to say, it's not that easy, but the fact of the matter is its design.

Deane Michael Dray: Predominantly now there'll be a variety of different negotiations.

Deane Michael Dray: With the with the participants that are building out the infrastructure, but.

Deane Michael Dray: The most important part is it's kind of when the spec business early on and then we see where we go from there.

Deane Michael Dray: Data centers in Europe, I'm going to have to get back to you I don't think it's meaningful I think that the data center activity that we see as more North American based.

Speaker Change: That's real helpful. Thanks.

Deane Michael Dray: Thanks.

Deane Michael Dray: Yeah.

Speaker Change: Thank you, ladies and gentlemen that concludes our question and answers period.

Speaker Change: <unk> first quarter 2020 earnings Conference call you May now disconnect your lines at this time.

Deane Michael Dray: That's real helpful, thanks. David Dickens!

Speaker Change: Have a wonderful day.

Speaker Change: Okay.

Deane Michael Dray: Yeah.

Deane Michael Dray: [music].

Deane Michael Dray: Yeah.

Operator: And thank you, ladies and gentlemen. That concludes our question and answer period and Dover's first quarter 2020 earnings conference call. You may now disconnect your lines at this time and have a wonderful day.

Deane Michael Dray: [music].

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Deane Michael Dray:

Deane Michael Dray: Yeah.

Deane Michael Dray: Yeah.

Deane Michael Dray: Okay.

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Deane Michael Dray: Yes.

Deane Michael Dray: [music].

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Deane Michael Dray: Okay.

Deane Michael Dray: Hum.

Deane Michael Dray: Okay.

Deane Michael Dray: Yeah.

Deane Michael Dray: [music].

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Deane Michael Dray: Yeah.

Deane Michael Dray: Hum.

Deane Michael Dray: Okay.

Deane Michael Dray: Oh.

Deane Michael Dray: [music] Hum.

Operator: BF-WATCH TV 2021