Q2 2024 Vontier Corp Earnings Call

Good morning, ladies and gentlemen, and welcome to the Vontier Second Quarter 2024 earnings call.

Operator: Quarter 2024 Earnings Call. At this time, all lines are in listen-only mode.

Operator: Quarer 2024 earnings call. At this time, all lines are in listen-only mode.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press the star, button, and zero for the operator. This call is being recorded on August 1st, 2024, and a replay will be made available shortly after. I would now like to turn the conference over to Ryan Edelman, Vontier's Vice President of Investor Relations. Please go ahead.

Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press the star button and zero for the operator.

Speaker Change: At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press the star, button, and zero for the operator.

Operator: This call is being recorded on August 1st, 2024, and a replay will be made available shortly after.

Speaker Change: This call is being recorded on August 1st, 2024, and a replay will be made available shortly after.

Ryan Edelman: I would like to turn the conference over to Ryan Edelman, Vontier's Vice President of Investor Relations. Please go ahead.

Speaker Change: I would now like to turn the conference over to Ryan Edelman, Vontier's Vice President of Investor Relations. Please go ahead.

Ryan Edelman: Thank you. Good morning, everyone, and thank you for joining us on the call this morning to discuss our second core results. With me today, Mark Morelli, our President and Chief Executive Officer, and On Human Aga, our Senior Vice President and Chief Financial Officer.

Ryan Edelman: Thank you. 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 Morelli, our President and Chief Executive Officer, and Anshooman Aga, our Senior Vice President and Chief Financial Officer. You can find both our press release as well as the slide presentation that we will refer to during today's call in the investor relations section of our website at investors.vontier.com.

Ryan Edelman: Thank you. 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 Morelli, our President and Chief Executive Officer, and Anshooman Aga, our Senior Vice President and Chief Financial Officer.

Ryan Edelman: You can find both our press release as well as our slide presentation that we will refer to during today's call on the Investor Relations section of our website at investors.vontier.com. Please note that during today's call, we'll present certain non-GAAP financial measures.

Speaker Change: You can find both our press release as well as our slide presentation that we will refer to during today's call on the investor relations section of our website at investors.vontier.com.

Ryan Edelman: Please note that during today's call, we will present certain non-GAAP financial measures. We 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 will or may occur in the future. These forward-looking statements are subject to risks and uncertainties. The actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them.

Speaker Change: Please note that during today's call, we will present certain non-GAAP financial measures. We 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 will or may occur in the future.

Ryan Edelman: We'll also make four-looking statements within the meaning of the Federal Security's laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These four-looking statements are subject to risks and uncertainties. Actual results might differ materially from any four-looking statements that we make today. We do not assume any obligation to update them.

Speaker Change: These forward-looking statements are subject to risk and uncertainties. Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them.

Ryan Edelman: Information regarding these factors that may cause actual results to differ materially from these four-looking statements is available on our website and in our SEC filings.

Ryan Edelman: Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SAT file. With that, I'd like to turn the call over to Mark. Thanks, Ryan. And good morning, everyone.

Mark Morelli: Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SAT filings. With that, I'd like to turn the call over to Mark.

Mark Morelli: With that, I'd like to turn the call over to Mark. Thanks, Ryan, and good morning, everyone. Thank you for joining us. On today's call, I'll provide a high-level overview of our performance in Q2 and an update on strategy execution as we navigate the current dynamic environment. And Schumann will then provide a deeper dive into Q2 results and conclude with our 2024 outlook update before we move into Q&A. Let's get started with a summary of the quarter on slide three.

Mark D. Morelli: Thank you for joining us. On today's call, I'll provide a high-level overview of our performance in Q2, and an update on strategy execution as we navigate the current dynamic environment. Anshooman will then provide a deeper dive into Q2 results and conclude with our 2024 Outlook update before we move into Q&A. Let's get started with a summary of the quarter on slide three. Second quarter results were below expectations and a challenging quarter. Elevated macro uncertainty delayed customers' project timing and discretionary spending, impacting orders and shipments at the tail end of the quarter.

Mark Morelli: Thanks Ryan and good morning everyone. Thank you for joining us. On today's call I'll provide a high-level overview of our performance in Q2 and an update on strategy execution as we navigate the current dynamic environment.

Mark D. Morelli: Our fueling and alternative energy businesses both declined mid-single digits organically, driven by order delays which pushed shipments into the third quarter. Through July, we've recovered over $20 million of our Q2 shortfall. We continue to see convenience retail operators grow their CapEx budgets. We're also seeing larger new build projects take priority as the pace of smaller refresh and retrofit activity slows near term. Market activity continues to be healthy as new site construction projects, soak up resources, and shorter-term refresh projects push out. However, our repair solution segment also declined mid-single digits amid a larger than expected pullback in discretionary spending by service technicians.

Mark Morelli: Anshooman will then provide a deeper dive into Q2 results and conclude with our 2024 Outlook update before we move into Q&A.

Mark Morelli: The second quarter results were below expectations and a challenging quarter. Elevated macro uncertainty, delays, customers' project timing, and discretionary spending, impacting orders and shipments at the tail end of the quarter. Our fueling and alternative energy businesses both decline mid-single digits organically, driven by order delays, which push shipments into the third quarter. Through July, we've recovered over $20 million of our Q2 shortfall. We continue to see convenience retail operators grow their capex budgets. We're also seeing larger new build projects take priority as the pace of the smaller refresh and retrofit activity slows near term. Market activity continues to be healthy as new site construction projects, soak-up resources, and shorter-term refresh projects push out.

Shuman: Let's get started with a summary of the quarter on slide 3.

Speaker Change: Second quarter results were below expectations and a challenging quarter. Elevated macro uncertainty delayed customers project timing and discretionary spending, impacting orders and shipments at the tail end of the quarter.

Shuman: Our fueling and alternative energy businesses both declined mid-single digits organically, driven by order delays which pushed shipments into the third quarter.

Shuman: Through July , we've recovered over $20 million of our Q2 shortfall. We continue to see convenience retail operators grow their CapEx budgets.

Mark Morelli: Our repair solution segment also declined mid-single digits amid a larger than expected pullback in discretionary spending by service technicians. While technician wages and employment remain strong, prolonged inflation, macro and election uncertainty, and broadening consumer weakness in the U.S. are impacting buying the suit. We continue to perform well against industry benchmarks, but sales for discretionary product lines slow at the end of the quarter and will likely remain under pressure until interest rates move lower and work through US election uncertainties. Despite the headwind from order delays and lower book and turn business, core order growth was approximately 1%, and our book to bill remained above one, consistent with the first quarter.

Shuman: Our repair solution segment also declined mid-single digits amid a larger than expected pullback in discretionary spending by service technicians.

Mark D. Morelli: While technician wages and employment remain strong, prolonged inflation, macro and election uncertainty, and broadening consumer weakness in the U.S. are impacting buying decisions. We continue to perform well against industry benchmarks, but sales for discretionary product lines slowed more at the end of the quarter and will likely remain under pressure until interest rates move lower and we're through U.S. election uncertainty. Despite the headwind from order delays and lower book and turn business, core order growth was approximately 1%, and our book-to-bill remained above 1% consistent with the first quarter. However, margins decreased on lower volumes.

Shuman: While technician wages and employment remain strong, prolonged inflation, macro and election uncertainty, and broadening consumer weakness in the U.S. are impacting buying decisions.

Shuman: Despite the headwind from order delays and lower book-and-turn business, core order growth was approximately 1%, and our book-to-bill remained above 1% consistent with the first quarter.

Mark Morelli: Martin's decrease on lower volumes; however, gross margins are up year-to-year as we delivered solid price cost and productivity, and our new product launches are gaining traction with customers. We estimate the headwind from lower volumes equates to more than 100 basis point headwind relative to our guidance range.

Mark D. Morelli: However, gross margins are up year over year as we delivered solid price, cost, and productivity, and our new product launches are gaining traction with customers. We estimate the headwind from lower volumes equates to more than 100 basis points of headwind relative to our guidance range.

Shuman: Margins decrease on lower volumes, however gross margins are up year over year as we delivered solid price costs and productivity, and our new product launches are gaining traction with customers.

Mark Morelli: Given the incremental macro pressures we saw on a couple of our in-markets at the end of Q2 impacting order timing, we're lowering our outlook for the full year. As you know, we're pursuing a business simplification program as part of our strategy. We are accelerating actions to optimize our cost structure and have identified $12 million of in-year savings. This is incremental to the $50 million run rate savings. That means we delivered in 2023. Our balance sheet remains strong, bolstered by a solid cash flow generation profile. We paid down $100 million in debt year-to-date, reducing our net leverage to 2.7 times.

Mark D. Morelli: Given the incremental macro pressures we saw on a couple of our end markets at the end of Q2, impacting order timing, we're lowering our outlook for the full year. As you know, we're pursuing a business simplification program as part of our strategy. We are accelerating actions to optimize our cost structure and have identified $12 million of in-year savings. This is incremental to the $50 million run rate savings we delivered in 2023. Our balance sheet remains strong, bolstered by a solid cash flow generation profile. We paid down $100 million in debt year-to-date, reducing our net leverage to 2.7 times.

Shuman: As you know, we're pursuing a business simplification program as part of our strategy.

Shuman: We are accelerating actions to optimize our cost structure and have identified 12 million dollars of in-year savings.

Shuman: This is incremental to the $50 million run rate savings we delivered in 2023. Our balance sheet remained strong, bolstered by a solid cash flow generation profile. We paid down $100 million in debt year-to-date, reducing our net leverage to 2.7 times.

Mark Morelli: We also repurchased roughly $38 million in shares in Q2. We will prioritize share buybacks in the second half of the year, including an expected accelerated share repurchase program. And Schumann will provide some more details in a moment.

Mark D. Morelli: We also repurchased roughly $38 million in shares in Q2. We will prioritize share buybacks in the second half of the year, including an expected accelerated share repurchase program, and Anshooman will provide some more details in a moment. Turn aside four.

Shuman: We also repurchased roughly $38 million in shares in Q2.

Mark Morelli: Turn aside for, as we manage through near-term market dislocations, we remain focused on what is within our control and positioning volunteer for the future. To that end, we continue to execute our connected mobility strategy and drive value creation through our three pillars, which we outlined at our March 2023 investor day. Our strategy is about operational excellence and accelerating growth, capturing secular growth opportunities in our end markets as we deliver more connected, integrated solutions solving high-value customer problems. Pillar 1, optimize our core, is about further optimizing our cost structure to expand operating profit margin. We rely heavily on VBS and the 80-20 principles embedded in our focus and prioritization program.

Shuman: As we manage through near-term market dislocations, we remain focused on what is within our control and positioning Vontier for the future. To that end, we continue to execute our connected mobility strategy and driving value creation through our three pillars, which we outlined at our March 2023 Investor Day.

Mark D. Morelli: To that end, we continue to execute our connected mobility strategy and drive value creation through our three pillars, which we outlined at our March 2023 Investor Day. Our strategy is about operational excellence and accelerating growth, capturing secular growth opportunities in our end markets as we deliver more connected, integrated solutions solving high-value customer problems. Pillar one, optimize our core, is about further optimizing our cost structure to expand operating profit margin. We rely heavily on VBS and the 80-20 principles embedded in our focus and prioritization program.

Shuman: Pillar 1, Optimize Our Core, is about further optimizing our cost structure to expand operating profit margin.

Mark Morelli: While we continue to reduce our global dispenser platforms, we're also focused on subsystem and component harmonization. As an example, we're reducing our hydraulic configurations by half. We've also reduced our manufacturing footprint by over 600,000 square feet, with more opportunities for reductions. Recently, we've opened a new center of excellence in India, covering engineering, IT, and other support functions. While improving our capabilities, this is enabling us to reduce overall product development and support costs by nearly a third. Our incremental cost reductions are indicative of the business.

Mark D. Morelli: While we continue to reduce our global dispenser platforms, we're also focused on subsystem and component harmonization. As an example, we're reducing our hydraulic configurations by half. We've also reduced our manufacturing footprint by over 600,000 square feet, with more opportunities for reduction. Recently, we opened a new Center of Excellence in India covering engineering, IT, and other support functions. While improving our capabilities, this is enabling us to reduce overall product development and support costs by nearly a third.

Shuman: While we continue to reduce our global dispenser platforms, we're also focused on subsystem and component harmonization. As an example, we're reducing our hydraulic configurations by half.

Shuman: Recently we've opened a new Center of Excellence in India covering engineering, IT, and other support functions.

Shuman: While improving our capabilities, this is enabling us to reduce overall product development and support costs by nearly a third. Our incremental cost reductions are indicative of the runway of opportunities to continue to simplify our business.

Mark D. Morelli: Our incremental cost reductions are indicative of the runway of opportunities to continue to simplify our business. Pillar 2, Expanding Our Core, is about leveraging our current market positions to accelerate growth with a focus on driving share gains through innovation and improving product vitality. We're seeing significant interest in our new FlexPay 6 offering, a fully integrated, connected, and flexible payment solution that is uniquely positioned as it incorporates the most up-to-date payment card industry standard, PCI 6.

Mark Morelli: Pillar 2, expanding our core, is about leveraging our current market positions to accelerate growth, with a focus on driving share gains through innovation and improving product vitality. We're seeing significant interest in our new FlexPay 6 offering a fully integrated connected and flexible payment solution that is uniquely positioned as it incorporates the most up-to-date Payment Card Industry Standard PCI 6. As an example, we're currently deploying FlexPay 6 to an existing large global retailer to enable a fully integrated personalized loyalty program designed to drive customer engagement and hire in-store traffic across their entire North American footprint. Further, this or our vehicle identification system solution, which leverages smart hardware and cloud-connected technology to create an automated payment security offering, continues to gain traction.

Shuman: We're seeing significant interest in our new FlexPay 6 offering, a fully integrated, connected, and flexible payment solution that is uniquely positioned as it incorporates the most up-to-date payment card industry standard, PCI 6.

Mark D. Morelli: As an example, we're currently deploying Flexbase 6 to an existing large global retailer to enable a fully integrated personalized loyalty program designed to drive customer engagement and hire in-store traffic across their entire North American footprint. Further, this or our vehicle identification system solution, which leverages smart hardware and cloud-connected technology to create an automated payment security offering, continues to gain traction. We were recently awarded a multi-year contract to supply this technology to fuel retailers in the Middle East, and we are currently rolling this out.

Shuman: Further, VIZ, or our Vehicle Identification System Solution, which leverages smart hardware and cloud-connected technology to create an automated payment security offering, continues to gain traction.

Mark Morelli: We were recently awarded a multi-year contract to supply this technology to fueling retailers in the Middle East, and we're currently rolling this out. And we have a strong pipeline of NFX-based flexible retail solutions, which continues to build. We're currently in late-stage pilots with several leading retailers in North America. Customer interest in these pilots is strong and extends beyond our initial focus on payment to incorporate loyalty programs and site management applications. We are encouraged by our growing pipeline of opportunities.

Mark D. Morelli: And we have a strong pipeline of NFX-based flexible retail solutions, which continues to build. We're currently in late stage pilots with several leading retailers in North America. Customer interest in these pilots is strong and extends beyond our initial focus on payment to incorporate loyalty programs and site management applications. We are encouraged by our growing pipeline of opportunities. Pillar three is focused on pursuing opportunities that expand into adjacent markets with solutions leveraging new and existing offerings.

Shuman: Customer interest in these pilots is strong and extends beyond our initial focus on payment to incorporate loyalty programs and site management applications. We are encouraged by our growing pipeline of opportunities.

Mark Morelli: Pillar 3 is focused on pursuing opportunities that expand into adjacent markets with solutions leveraging new and existing offerings. We recently received our first sizable order for our new turnkey EV charging solution Connect, which is targeted at supporting our large install base of c store customers. The pipeline is growing rapidly. The build out of our EV charging infrastructure continues to accelerate, particularly across Europe. We continue to convert charge point operators to our Drive platform. Through the first half of 2024, we doubled our ports under management year over year to over 85,000, and we're well on track to achieve over 100,000 ports under management by year end.

Shuman: Pillar three is focused on pursuing opportunities that expand into adjacent markets with solutions leveraging new and existing offerings.

Mark D. Morelli: We recently received our first sizable order for our new Turnkey EV charging solution, Connect, which is targeted at supporting our large installed base of C-Store customers. The pipeline is growing rapidly. The build-out of our EV charging infrastructure continues to accelerate, particularly across Europe.

Shuman: We recently received our first sizable order for our new turnkey EV charging solution Connect, which is targeted at supporting our large install base of C-Store customers. The pipeline is growing rapidly.

Mark D. Morelli: We continue to convert charge point operators to our drive platform. Through the first half of 2024, we've doubled our ports under management year over year to over 85,000, and we're well on track to achieve over 100,000 ports under management by year end. Although we are seeing some near-term weakness in our markets, we're well-positioned in durable, attractive end markets with long-term profitable growth opportunities, leading market share positions, business simplification opportunities, and cash generation profile are bolstering our position, and we expect to capture even greater operating leverage as demand accelerates. With that, let me turn the call over to Anshooman to walk you through the details of the quarter and our updated outlook. Thanks, Mark, and good morning, everyone.

Shuman: Through the first half of 2024 we've doubled our ports under management year over year to over 85,000 and we're well on track to achieve over 100,000 ports under management by year end.

Mark Morelli: Although we are seeing some near-term weakness in our markets, we're well positioned, endurable, attractive end markets with long-term, profitable growth opportunities. Our leading market share positions, business simplification opportunities, and cash generation profile are bolster in our position, and we expect to capture even greater operating leverage as demand accelerates.

Anshooman Aga: With that, let me turn the caller to Enchuman to walk you through the details of the quarter and our updated outlook. Thanks, Mark, and good morning, everyone. I'll start off with a summary of our consolidated results for the quarter on slide 5. For the second quarter, we reported $696 million in total sales for a core decline of approximately 3%. As Mark noted, sales were impacted by order timing at our environmental infueling solution segment and our alternative energy business, as well as lower discretionary spend impacting repair solutions. Book to Bill was above one in all three of our segments, with each reporting's low single-digit order growth year over year.

Anshooman Aga: I'll start off with a summary of our consolidated results for the quarter on slide five. For the second quarter, we reported $696 million in total sales for a core decline of approximately 3%. As Mark noted, sales were impacted by order timing in our environmental and fueling solution segment and our alternative energy business, as well as lower discretionary spend impacting repair solutions. Adjusted operating profit margin declined by approximately 60 basis points year over year as contributions from positive price costs and productivity were more than offset by lower volume. This resulted in an adjusted EPS of 63 cents for the quarter.

Shuman: Thanks, Mark, and good morning, everyone.

Speaker Change: For the second quarter, we reported $696 million in total sales, for a core decline of approximately 3%.

Speaker Change: As Mark noted, sales were impacted by order timing at our environmental and fueling solution segment and our alternative energy business, as well as lower discretionary spend impacting repair solutions.

Anshooman Aga: Adjusted operating profit margin declined by approximately 60 basis points year over year, as contributions from positive price cost and productivity more than offset by lower volume. This resulted in adjusted EPS of 63 cents for the quarter. Adjusted free cash flow was 26 million, reflecting higher inventory due to the shipment delays and unfavorable linearity of revenue.

Speaker Change: Adjusted operating profit margin declined by approximately 60 basis points year over year as contributions from positive price cost and productivity were more than offset by lower volume.

Speaker Change: This resulted in adjusted EPS of 63 cents for the quarter.

Anshooman Aga: Adjusted free cash flow was $26 million, reflecting higher inventory due to the shipment delays and unfavorable linearity of revenue. Turning to our segment results, starting on slide six, environmental and fueling solutions core sales declined 5% year over year. Shipment delays negatively impacted sales by approximately $30 million, with over half recovered in July. Dispenser sales declined compared to the prior year.

Speaker Change: Adjusted free cash flow was $26 million, reflecting higher inventory due to the shipment delays and unfavorable linearity of revenue.

Anshooman Aga: Turning to our segment results, starting on slide 6. Environmental and fueling solutions core sales declined 5% year over year. Shipment delays negatively impacted sales by approximately 30 million dollars, with over half recovered in July. Dispenser sales declined compared to the prior year. Large convenience store operators are prioritizing new bill projects, which have longer construction cycles. Some of this is at the expense of shorter term refresh and retrofit projects, which is temporarily impacting volume growth, both in the quarter and second half of the year. Aftermarket part sales increased high teens in the quarter. We continue to leverage a large and expanding installed base and focus on high-value components, accelerating growth in the high-margin offering.

Speaker Change: Environmental and fueling solutions core sales declined 5% year over year. Shipment delays negatively impacted sales by approximately $30 million, with over half recovered in July . Dispenser sales declined compared to the prior year.

Anshooman Aga: Large convenience store operators are prioritizing new-build projects. Aftermarket parts sales increased in the high teens in the quarter. We continue to leverage a large and expanding installed base and focus on high-value components, accelerating growth in this high-margin offering. Sales of environmental solutions also grew during the quarter with low double-digit order growth benefiting from global regulatory tailwinds. Segment operating profit margins expanded 60 basis points as we were able to offset lower volumes with positive price costs, strong supply chain management, and operational productivity. Orders were up nearly 20% for the second consecutive quarter. Sales for Alternative Energy Solutions declined mid-single digits as $6 million of shipments pushed from June and were recovered in July.

Speaker Change: Large convenience store operators are prioritizing new-build projects, which have longer construction cycles.

Speaker Change: Some of this is at the expense of shorter-term, refresh and retrofit projects, which is temporarily impacting volume growth, both in the quarter and second half of the year.

Speaker Change: Aftermarket parts sales increased high teens in the quarter. We continue to leverage a large and expanding installed base and focus on high-value components, accelerating growth in this high-margin offering.

Anshooman Aga: Sales of environmental solutions also grew during the quarter, with low double-digit order growth benefiting from global regulatory tailwinds. Segment operating profit margins expanded 60 basis points as we were able to offset lower volumes with positive price cost, strong supply chain management, and operational productivity.

Speaker Change: Sales of environmental solutions also grew during the quarter with low double-digit order growth benefiting from global regulatory tailwinds.

Speaker Change: Segment operating profit margins expanded 60 basis points as we were able to offset the lower volumes with positive price cost, strong supply chain management, and operational productivity.

Anshooman Aga: Turning to slide 7. Mobility technologies core sales increased 1% in the quarter, driven by strong demand for payment and enterprise productivity solutions in the convenience retail market, offset by ongoing weakness in our car wash business. In Vancouver, delivered another strong quarter, reporting low double-digit sales growth. Orders were up nearly 20% for the second consecutive quarter. Sales for alternative energy solutions declined, hit single digits, as $6 million of shipments pushed from June and was recovered in July. Demand for our compressed and renewable natural gas solutions remains robust, with orders up 20% in Q2. We expect this business to return to mid-steens growth in the second half and deliver low double-digit growth for the full year.

Speaker Change: Turning to slide seven.

Speaker Change: Invenco delivered another strong quarter, reporting low double-digit sales growth.

Anshooman Aga: Demand for our compressed and renewable natural gas solutions remains robust, with orders up 20% in Q2. However, sales at the car wash technology business DRB declined mid-teens in the quarter, largely as anticipated, driven by continued lower demand for a point of sale and control systems tied to new tunnel car wash sites. This was partially offset by low double-digit growth and recurring revenue led by strength in service and aftermarket. However, our DRB project pipeline continues to push to the right given prolonged higher interest rates.

Speaker Change: Demand for our compressed and renewable natural gas solutions remains robust, with orders up 20% in Q2.

Anshooman Aga: Sales at our car wash technology business, GRB, declined mid-steens in the quarter, largely as anticipated, driven by continued lower demand in a point of sale and control systems tied to new tunnel car wash sites. This was partially offset by low double-digit growth in recurring revenue, led by strength in service and aftermarket. Our DRB project pipeline continues to push to the right given prolonged higher interest rates. Notably, our backlog for 2025 continues to build, exceeding our level for the back half of this year. Segment operating profit margin was down approximately 140 basis points versus the prior year, due primarily to unfavorable mix and ongoing R&D investments at Invent Go.

Speaker Change: Sales at our Car Wash Technologies business DRB declined mid-teens in the quarter, largely as anticipated, driven by continued lower demand in our point-of-sale and control systems tied to new tunnel car wash sites.

Speaker Change: This was partially offset by low double-digit growth in recurring revenue led by strength in service and aftermarket.

Anshooman Aga: Notably, our backlog for 2025 continues to build, exceeding our level for the back half of this year. Segment operating profit margin was down approximately 140 basis points versus the prior year, due primarily to unfavorable mix and ongoing R&D investments at Invenco. Repair Solutions core sales declined 5% in the quarter.

Speaker Change: Our DRB project pipeline continues to push to the right, given prolonged higher interest rates. Notably, our backlog for 2025 continues to build, exceeding our level for the back half of this year.

Speaker Change: Segment operating profit margin was down approximately 140 basis points versus the prior year due primarily to unfavorable mix and ongoing R&D investments at Invenco.

Anshooman Aga: Finally, on slide 8, Repair Solutions core sales declined 5% in the quarter. There was a meaningful pullback in service text discretionary spent in the month of June. As an example, tool storage sales declined just over 25% in the month. Sales within diagnostics were up low single digits, which is a testament to a new product vitality, with last year's Max Five launch continuing to capture market share. Segment operating profit margin declined approximately 500 basis points, driven by lower volumes, as well as the timing of bad debt reserves year over year.

Speaker Change: Finally, on slide 8.

Speaker Change: Repair Solutions core sales declined 5% in the quarter.

Speaker Change: There was a meaningful pullback in service tech's discretionary spend in the month of June . As an example, tool storage sales declined just over 25% in the month.

Anshooman Aga: Sales within Diagnostics were up low single digits, which is a testament to our new product vitality with last year's MAX 5 launch continuing to capture market share. However, segment operating profit margin declined approximately 500 basis points driven by lower volumes, as well as the timing of bad debt reserves year over year. Looking at the balance sheet and capital deployment on slide nine, during the quarter, we retired our 2024 maturity and ended the quarter with a net debt ratio of 2.7 times, in line with our target of two and a half to three times.

Speaker Change: Sales within Diagnostics were up low single digits.

Speaker Change: which is a testament to our new product vitality with last year's Max 5 launch continuing to capture market share.

Speaker Change: Segment operating profit margin declined approximately 500 basis points driven by lower volumes as well as the timing of bad debt reserves year over year.

Anshooman Aga: Looking at a balance sheet and capital deployment on slide 9. During the quarter, we retired our 2024 maturity and ended the quarter with a net debt ratio of 2.7 times, in line with our target of two and a half to three times. We also completed approximately 38 million dollars in share repurchase in the quarter and 60 million dollars year to date. Our balance sheet is healthy with strong liquidity, with over 300 million dollars in cash on hand and an undrawn credit revolver. We continue to believe there is a significant valuation disconnect relative to a long-term growth, profitability, and cash generation potential.

Speaker Change: Looking at a balance sheet and capital deployment on slide nine.

Speaker Change: During the quarter, we retired our 2024 maturity and ended the quarter with a net debt ratio of 2.7 times.

Speaker Change: in line with our target of two-and-a-half to three times.

Speaker Change: Our balance sheet is healthy, with strong liquidity, with over $300 million in cash on hand and an undrawn credit revolver.

Anshooman Aga: We continue to believe there is a significant valuation disconnect relative to long-term growth, profitability, and cash generation potential. In the second half, we expect to deploy a significant amount of the free cash flow we generate to buy back shares, including our near-term intent to enter into a $100 million accelerated share repurchase program. With that, let me provide an update on our thinking for the third quarter and full year. I'm on slide 10.

Speaker Change: We continue to believe there is a significant valuation disconnect relative to our long-term growth, profitability, and cash generation potential.

Anshooman Aga: In the second half, we expect to deploy a significant amount of the free cash flow we generate to buybacks, including our near-term intent to enter into a hundred million dollar accelerated share repurchase program.

Speaker Change: In the second half, we expect to deploy a significant amount of the free cash flow we generate to buybacks, including our near-term intent to enter into a $100 million accelerated share repurchase program.

Anshooman Aga: With that, let me provide an update on our thinking for the third quarter and full year. I'm on slide 10. We expect the macro environment to remain challenged near-term amid continued uncertainty and Zoom weakness, with higher rates and US elections continuing to delay customer order decisions and discretionary spending. We anticipate top-line performance to remain pressured under the scenario and now expect Q3 core growth to be in the range of minus 2% to plus 2%, with margin down 80 to 110 basis points, equating to EPS in the range of 67 to 71 cents. For the full year, we expect revenue in the range of $2.9 to $3 billion, which reflects a 1% core decline on the low end and approximately 3% growth on the high end.

Speaker Change: With that, let me provide an update on our thinking for the third quarter and full year. I'm on slide 10.

Anshooman Aga: We expect the macro environment to remain challenged near-term amid continued uncertainty and consumer weakness, with higher rates and U.S. elections continuing to delay customer order decisions and discretionary spending. We anticipate top line performance to remain pressured under this scenario and now expect Q3 core growth to be in the range of minus 2% to plus 2%, with margin down 80 to 110 basis points, equating to EPS in the range of 67 to 71 cents.

Speaker Change: We expect the macro environment to remain challenged near-term amid continued uncertainty and consumer weakness, with higher rates and U.S. elections continuing to delay customer order decisions and discretionary spending.

Speaker Change: We anticipate top-line performance to remain pressured under this scenario and now expect Q3 core growth to be in the range of minus 2% to plus 2% with margin down 80 to 110 basis points equating to EPS in the range of 67 to 71 cents.

Anshooman Aga: For the full year, we expect revenue in the range of $2.9 to $3 billion, which reflects a 1% core decline on the low end and approximately 3% growth on the high end. With more of our incremental cost actions to benefit the fourth quarter, we anticipate operating margin flat for the prior year to up 50 basis points. Although this is below our prior guidance and within a wider range, we believe our current outlook reflects an appropriate level of conservativeness based on what we are seeing and hearing from customers and channel partners. We thought it would be helpful to provide more transparency into the moving pieces of the top line guide.

Speaker Change: For the full year, we expect revenue in the range of $2.9 to $3 billion, which reflects a 1% core decline on the low end and approximately 3% growth on the high end.

Anshooman Aga: With more of our incremental cost actions to benefit the fourth quarter, we anticipate operating margin flat with the prior year to up 50 basis points. EPS would be in the range of $2.80 to $3. Recognizing this is below our prior guidance and with a wider range, we believe our current outlook reflects an appropriate level of conservativeness based on what we are seeing and hearing from customers and channel partners.

Speaker Change: With more of our incremental cost actions to benefit the fourth quarter, we anticipate operating margin flat with the prior year to up 50 basis points.

Speaker Change: EPS would be in the range of $2.80 to $3.00.

Anshooman Aga: We thought it would be helpful to provide more transparency into the moving pieces of the top line guide. We've included slide 11 to help bridge you from the prior sale of guidance midpoint to our updated 2024 midpoint of $2.95 billion. Operationally, we're lowering a second half outlook by $110 million, which we break down for you by segment on the slide.

Speaker Change: We thought it would be helpful to provide more transparency into the moving pieces of the top-line guide.

Anshooman Aga: We've included slide 11 to help bridge you from the prior sales guidance midpoint to our updated 2024 midpoint of $2.95 billion. Additionally, operationally, we're lowering our second half outlook by $110 million, which we break down for you by segment on the slide. We've bridged our EPS guidance in a similar manner. Collectively, a lower share count, lower interest, and lower tax and other expenses add another $0.05 for a net reduction of $0.18 versus a previous guidance midpoint. With that, I'd like to pass the call back over to Mark. Thanks, Anshooman.

Speaker Change: We've included slide 11 to help bridge you from the prior sales guidance midpoint to our updated 2024 midpoint of $2.95 billion.

Speaker Change: Operationally, we're lowering our second half outlook by $110 million.

Anshooman Aga: Turning to slide 12, we've bridged our EPS guidance in a similar manner. Dropping through the $120 million reduction in revenue at a standard gross margin equates to an EPS decline of around $0.29. The savings associated with our accelerated cost reductions equate to a six-cent benefit. Collectively, a lower share count, lower interest, and lower tax and other expenses adds back another five cents for a net reduction of 18 cents versus a previous guidance midpoint.

Speaker Change: Turning to slide 12.

Speaker Change: The savings associated with our accelerated cost reductions equate to a six-cent benefit.

Mark Morelli: With that, I'd like to pause the call back over to Mark.

Mark Morelli: Thanks and Human. We're continuing to transform our business. We're a reshape in our portfolio and have executed a balanced capital allocation strategy at overall double-digit returns. With increasing software and aftermarket sales, we've increased our current revenue as a percentage of total sales by over 10 percentage points in spin. We are enabling the digital transformation of our customers. A great example of this is the traction we are seeing with our inventive offerings in payments and enterprise productivity. As we connect, manage and scale the mobility ecosystem, we expect our continued portfolio transformation will enable sustainable growth and allow us to deliver top-tier financial terms. Despite the slower than expected macro environment near-term, we remain confident in our longer-term outlook.

Mark D. Morelli: We're continuing to transform our business. We're reshaping our portfolio and have executed a balanced capital allocation strategy at overall double-digit returns. With increasing software and aftermarket sales, we've increased our recurring revenue as a percentage of total sales by over 10 percentage points in spend. We are enabling the digital transformation of our customers.

Enshooman: Thanks, Anshooman. We're continuing to transform our business. We're reshaping our portfolio and have executed a balanced capital allocation strategy at overall double-digit returns.

Speaker Change: With increasing software and aftermarket sales, we've increased our recurring revenue as a percentage of total sales by over 10 percentage points in spend.

Mark D. Morelli: A great example of this is the traction we are seeing with our Invenco offerings in payments and enterprise productivity. As we connect, manage, and scale the mobility ecosystem, we expect our continued portfolio transformation will enable sustainable growth and allow us to deliver top-tier financial returns. Despite the slower than expected macro environment in the near term, we remain confident in our longer term outlook. Our end markets are compelling, underpinned by durable secular drivers, and we're advantaged given our leading share positions and strong customer relationships. With that, operator, please turn the line over to questions. Thank you. We will now begin the question and answer session. To ask a question, you may press the star key, then 1 on your touchtone phone.

Speaker Change: As we connect, manage, and scale the mobility ecosystem, we expect our continued portfolio transformation will enable sustainable growth and allow us to deliver top-tier financial returns.

Speaker Change: Despite the slower-than-expected macro environment near term, we remain confident in our longer-term outlook. Our end markets are compelling, underpinned by durable secular drivers, and we're advantaged given our leading share positions and strong customer relationships.

Mark Morelli: Our end markets are compelling, underpinned by durable circular drivers, and we're advantaged given our leading share positions and strong customer relationships.

Operator: With that operator, please turn the line over to questions. Thank you. We will now begin the question and answer session. To ask a question, you may press the star key, then one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press the star key, then two.

Speaker Change: With that, Operator, please turn the line over to questions.

Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press the star key, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press the star key, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Julian Mitchell, with Barclay. Please go ahead.

Speaker Change: To withdraw your question, please press the star key, then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Julian Mitchell: The first question comes from Julian Mitchell with Barclays. Please go ahead.

Julian Mitchell: Hi. Good morning. Good morning, John.

Julian C.H. Mitchell: Hi, good morning. Maybe just to start, so your guidance on the top line looks like it embeds sort of a mid single-digit type increase in sequential sales in the third quarter and the fourth quarter. So maybe just kind of help us understand, you know, which of the segments kind of leading or lagging those sequential moves and the sort of confidence in that sequential pickup. Yeah, Julian, maybe I'll get started.

with Barclays: with Barclays. Please go ahead.

Julian Mitchell: Maybe just a start. It looks like your guidance on the top line; I think it embeds a mid-single digit type increase in sequential sales in the third quarter and the fourth quarter. So maybe just kind of help us understand which of the segments leading or lagging those sequential moves and the sort of confidence in that sequential pickup.

Speaker Change: Hi, good morning.

Mark Morelli: Thank you, Mark. Enjoy.

Speaker Change: So maybe just kind of help us understand, you know, which of the segments kind of leading or lagging those sequential moves and the sort of confidence in that sequential pickup.

Mark Morelli: Yeah, Julian, maybe I'll get started. Yes, sequentially revenue will increase from Q2 to Q3 and then again in Q4. Also, that's a little bit of a typical seasonality. When you look at revenue growth, we will have revenue growth and mobility technologies. Both in Venco had strong orders in Q2. There have been up close to 20% now, two quarters in a row, so we should see continued growth in our Venco business. Also, Angie, alternative energies, business orders were up 20% in Q2. They did have 6 million of shipments that pushed out of June into July, so that business should have good high teens to mid-teens to high teens growth in the second quarter.

Mark D. Morelli: Yes, sequentially, revenue will increase from Q2 to Q3 and then again in Q4. Also, that's a little bit of typical seasonality. When you look at revenue growth, we will have revenue growth in mobility technologies. Both Invenco and HP had strong orders in Q2. They've been up close to 20% now, two quarters in a row, so we should see continued growth in our Invenco business. Also, orders for Angie, our Alternative Energies business, were up 20% in Q2.

Speaker Change: When you look at revenue growth, we will have revenue growth in mobility technologies. Both Invenco had strong orders in Q2. They've been up close to 20% now, two quarters in a row, so we should see continued growth.

Mark D. Morelli: They did have 6 million shipments that pushed out of June into July, so that business should have good high teens to mid-teens to high teens growth in the third quarter. Repair solutions will probably be flat, maybe slightly down sequentially.

Speaker Change: Good high teens to mid teens to high teens growth in the second in the third quarter Repair solutions will probably be flat maybe slightly down sequentially and

Mark Morelli: Repair solutions will probably be flat, maybe slightly down sequentially and Q3. We continue to see that the US consumers stretched the higher interest rates; higher inflation is impacting technicians, even though technicians are at record employment, record wages. We've seen them scale back, and we ran as part of our diligence to survey with multiple over 1000 technicians and also with our franchisees, and that's also what we're hearing: that despite working the same or more amount of hours, despite wages being up, they are scaling back because of the high cost of living. Then the fueling business should also step up both in Q3 and Q4.

Mark D. Morelli: We continue to see that the U.S. consumer is stretched. Higher interest rates and higher inflation are impacting technicians, even though technicians are at record employment and record wages. We've seen them scale back, and we ran, as part of our diligence, a survey with multiple, over 1,000 technicians, and also with our franchisees. And that's also what we're hearing, that despite working the same or more amount of hours, despite wages being up, they are scaling back because of the high cost of living.

Speaker Change: You three

Speaker Change: We continue to see the U.S. consumer stretched, the higher interest rates, higher inflation is impacting technicians, even though technicians are at record employment, record wages.

Speaker Change: We've seen them scale back, and we ran, as part of our diligence, a survey with multiple – over 1,000 technicians, and also with our franchisees. And that's also what we're hearing, that despite working the same or more amount of hours

Mark D. Morelli: And then the fueling business should also step up, both in Q3 and Q4. Again, spend a lot of time doing channel checks and listening to the voice of the customers, while some people are prioritizing new to the industry. And new to industry locations, both Greenfield and Brownfield, continue at a high rate. They have scaled back a little bit on the refresh and retrofit projects, but customer discussions have led to us believing in our guide. Thanks very much.

Mark Morelli: Again, spend a lot of time doing channel checks and voice of the customers while some people are prioritizing new to industry and new to industry locations. Both Greenfield and Brownfield continue at a high rate. They have scaled back a little bit on the repression retrofit projects, but customers' discussions have led to us believing in our guidance.

Speaker Change: And new to industry locations, both Greenfield and Brownfield continue at a high rate. They have scaled back a little bit on their refresh and retrofit projects, but customer discussions have led to us believing in our guidance.

Julian Mitchell: Thanks very much, and then just my follow-up on the sort of profiting profit level. So I think you're guiding sort of third quarter, you've got the margins down year on year close to 100 bips. Looks like the fourth quarter is back up year on year on the margin front and with a pretty big sequential margin increase in Q4 as well. So I realize on the sequential side there's some typical seasonality element there, but maybe just trying to understand, it doesn't like that Q4 margin has a lot of tailwind sort of built into it in the guide, maybe just flesh those out a bit if it's simply volumes or anything else in there.

Anshooman Aga: And then just my follow-up on the sort of operating profit level. So I think you're guiding the sort of third quarter. You've got the margins down year on year close to 100 bps. Looks like the fourth quarter is back up year on year on the margin front, and with a pretty big sequential margin increase in Q4 as well. So I realize on the sequential side, there's some typical seasonality element there, but maybe just trying to understand, you know, it doesn't like that Q4 margin has a lot of tailwind sort of built into it in the guide, maybe just flesh those out a bit if it's simply volumes Yes, Julian.

Speaker Change: is back up year on year on the margin front and with a pretty big sequential margin increase in Q4 as well. So I realize on the sequential side there's some

Julian C.H. Mitchell: So, yes, volumes do step up from Q3 to Q4, which definitely helps. But also, the 12 million of incremental cost that we talked about in the prepared remarks, that's heavily weighted towards the fourth quarter, just from a timing perspective. So, that definitely helps our Q4 margins. Sequentially, from Q2 to Q3, our margins step up about 90 basis points, and then they step up again in Q4. It's also from a compared perspective; Q3 last year was our highest margin quarter. So, Q3 is a tough year-on-year compare. Great, thank you.

Anshooman Aga: Yes, Julian, so yes, volumes do step up from Q3 to Q4, which definitely helps, but also the 12 million of incremental cost that we talked about in the prepared remarks that's heavily weighted towards the fourth quarter just from a timing perspective, so that definitely helps our Q4 margins. Sequentially from Q2 to Q3, our margins will step up about 90 basis points and then the step up again in Q4.

Speaker Change: Yes, Julian. So, yes, volumes do step up from Q3 to Q4.

Speaker Change: Cost that we talked about in the prepared remarks, that's heavily weighted towards the fourth quarter, just from a timing perspective. So that definitely helps our Q4 margins.

Julian Mitchell: It's also from a compare perspective, Q3 last year was the highest margin quarter, so there is Q3 is a tough year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on year on Great, thank you.

Joe Ritchie: The next question comes from Joe Ritchie with Goldman Sachs. Please go ahead. Hey, good morning, guys.

Operator: The next question comes from Joe Ritchie with Goldman Sachs, please go ahead. Hey, good morning, guys. Kind of heading into Q2 and kind of tilled off at the very end of the quarter, mostly on discretionary items that service technicians are not buying as much at a rate. So June actually dropped off 25% on toolbox. Thanks. Thanks, Mark. That was great and detailed.

Mark Morelli: Hi, Joe. Hey, Mark, my apology is if I missed it in your prepared comments, but can you just double-click a little bit more on this, like the timing of the order delays that impacted the quarter? What exactly was going on there? And then you referenced this recovery of greater than 20 million in July. What's the expectation for the rest of the quarter? Are you anticipating more recovery going forward? And how do you expect to get that? Yeah, absolutely. Happy to elaborate there, Joe. Look, there's no question we saw some uncertainty in some of the macro that affected some of our rent and markets late in the quarter.

Gail: Morning, Gail.

Gail: Hey, Mark, my apologies if I missed it in your prepared comments, but can you just double-click a little bit more on this, like the timing of the order delays that impacted the quarter, you know, what exactly was going on there?

Mark Morelli: So essentially, this was at GVR, and it was also at Macco. And so let me kind of break it down for you. So inside GVR, we had, as you may remember, a very strong Q1: 10% organic growth. And when we rolled into April, and all of our, we're very close to our customers, a lot of our channel checks, and also working with our distributors who do construction in the industry, they were very busy, very significantly over a year over a year in terms of the construction and the build-out. So we've seen actually a strengthening in the new construction, which is an appreciable part of the convenience store market in North America.

Speaker Change: So, essentially, this was at GVR, and it was also at MACCO, and so let me kind of break it down for you. So, inside GVR, we had, as you may remember, a very strong Q1, 10% organic growth.

Speaker Change: And when we rolled into April and all of our, we're very close to our customers, a lot of our channel checks and also working with.

Gail: are distributors who do construction in the industry.

Gail: They were very busy.

Gail: very significantly over year over year in terms of the construction and the build out. So we've seen actually a strengthening in the new construction, which is an appreciable part of the convenience store market in North America. And that continues to build out, which is very good for the medium and longer term.

Mark Morelli: And that continues to build out, which is very good for the medium and longer term. But what's happening in the softness is there's uncertainty and sort of the pacing of the refresh retrofit market, not to be confused with maintenance aftermarket parts, which is very much up. But these smaller projects, folks are, you know, pushing out a bit. And so it's really a pacing issue.

Gail: But what's happening in the softness is there's uncertainty in sort of the pacing of the refresh retrofit market, not to be confused with maintenance aftermarket parts, which is very much up.

Gail: But these smaller projects, folks are, you know, pushing out a bit, and so it's really a pacing issue, and we were sort of wrong on that timing on the pacing that developed late in the quarter.

Mark Morelli: And we were wrong on that timing, on the pacing that developed late in the quarter. So just on that point, what happened in July, it's just a rate issue. Those were all fulfilled in July. Most of them and a little bit now in August. And so what we're doing with our forecasts is we're offering our more prudent outlook that I think is more responsible, given that order rate and timing. While we see the new construction build, and there's lots of opportunities for convenience store operators to continue there. On the macro front, they came off a record expo in Q1.

Speaker Change: Just on that point, what happened in July , it's just a rate issue. Those were all fulfilled in July , most of them, and a little bit now in August . And so what we're doing with our forecast is we're offering our more prudent outlook.

Gail: that I think is more responsible given that order rate and timing while we see the new construction build.

Speaker Change: and there's lots of opportunities for convenience store operators to continue there. On the Matco front, they came off a record expo in Q1. They were up low double digits.

Mark Morelli: They were up low double digits. They saw kind of across the board; even high ticket items were selling quite well. The new lots of diagnostics that the ensuing made reference to, as well as toolboxes, which we watched very closely, was up 15% in Q1, kind of heading into Q2 and kind of tailed off at the very end of the quarter. Mostly on discretionary items that service technicians are not buying as much at a rate. So June actually dropped out 25% on toolboxes. And so that is one of the areas where there's macro uncertainty that is impacting the consumer confidence that service technicians are more on the medium to lower end of the income range in the United States.

Mark Morelli: And they're being impacted by higher inflation costs. Certainly, they're the cost that is impacting the families, impacting them. But longer term, there's great drivers on macro. We're watching those as well. Vipple Mell has traveled her up. Also, the total age of the car park at 12.6 years. And we did a survey. We're very close to our customers there, but we also did a survey to help corroborate some of the information we get from our channel checks. And we know that service technicians are going to buy less tools, but they're going to preference productivity items. We softly diagnostics continue to increase in the quarter, and specialty tools also eat out a gain.

Speaker Change: certainly

Speaker Change: that is impacting the families, impacting them.

Speaker Change: Also, the total...

Speaker Change: Age of the car park at 12.6 years.

Speaker Change: And we did a survey, we're very close to our customers there, but we also did a survey to help corroborate some of the information we get from our.

Speaker Change: And we know that service technicians are going to buy less tools, but they're going to preference productivity items. We saw actually diagnostics continue to increase.

Mark Morelli: So we know that even in this kind of backdrop, if you can offer more productivity offerings, but we've reflected more of this softness, more of this uncertainty.

Mark Morelli: Once we get past the election on Macco, and then that's going to be a release of some of the uncertainty there. Certainly, interest rates are going to help because folks are living off some of their credit card expenses. So we think both these are near-term issues that we're reflecting with the prudent guy. Thanks, Mark.

Joseph J. Donahue: The one follow-up question I would have for you is that, like, look, I think the market is hoping for a few rate cuts potentially by year-end. I guess as you kind of think about the sensitivity of your business to rates and then ultimately what that means for getting back to that 4% to 6% organic growth range, is there any color that you can kind of give us on that specifically? Yeah, I think there are certain elements of our business that are certainly impacted by rates. Certainly MACCO, the service technicians are linked to US consumers there.

Mark Morelli: That was great and detailed.

Joe Ritchie: The one follow-up I would have for you is it like, look, I think the market is hoping for a few rate cuts potentially by year end.

Speaker Change: Is it like, look, I think the market is is hoping for a few rate cuts potentially by year end.

Mark Morelli: I guess, as you kind of think about the sensitivity of your business to rate, and then ultimately what that means for getting back to that 4% to 6% organic growth range, is there any color that you can kind of give us on that specifically? Yeah, I think there are certain elements of our business that are certainly impacted by rates, certainly Macco. The service technicians are linked to US consumer there; the uncertainty on rates, no question, plays into it. We know that talking with our customers, and by the way, we're helping our and working very closely with our customers as they roll out their projects.

Speaker Change: I guess as you kind of think about the sensitivity of your business to rates and then ultimately what that means for getting back to that four to six percent organic growth range, is there any color that you can kind of give us on that specifically?

Mark D. Morelli: The uncertainty on rates, no question plays into it. We know that talking with our customers, and by the way, we're helping and working very closely with our customers as they roll out their projects, they're very confident in the new construction build-outs.

Mark Morelli: They're very confident in the new construction and buildouts. By the way, these are multi-year projects. This is not an industry that's over capacity; new venues work much better in the market. They tend to gain more consumers that come to their sites, and so there's a very successful new buildout activity, and that continues to go at an enhanced rate, and their good returns there. But interest rates might be some of the apprehension in the market and anticipating rate cuts.

Mark D. Morelli: By the way, these are multi-year projects. This is not an industry that has overcapacity. New venues work much better in the market. They tend to gain more consumers that come to their sites, and so there's very successful new build-out activity, and that continues to go at an enhanced rate, and there are good returns there. But interest rates might be some of the apprehension in the market, anticipating rate cuts. If you're able to throttle maybe more of the smaller refresh retrofit ones, there's no question being affected by the timing, and that was something that we didn't foresee as much as perhaps we should have, but I think we're offering that in a prudent guide going forward.

Mark Morelli: If you're able to throttle maybe more of the smaller refresh, retrofit ones, there's no question being affected by the timing, and that was something that we didn't foresee as much as maybe perhaps we should have. But I think we're offering that in a prudent guide going forward. I'll also add that our DRB business is impacted by the higher interest rates from a new build perspective. The economics of the car wash are impacted by the higher interest rates, and the pipeline of projects remains strong. People are really interested in this, and we're also starting to see some of this where the backlog for 2025 is already higher for DRB new systems versus the back-off of this year, with the expectations that interest rates are going to start coming down next year.

Mark D. Morelli: I'll also add that our DRB business is impacted by the higher interest rates from a new build perspective. However, the economics of the car wash are impacted by the higher interest rates, and the pipeline of projects remains strong. People are really interested in this, and we're also starting to see some of this where the backlog for 2025 is already higher for DRB new systems versus the back half of this with the expectations that interest rates are going to start coming down next year.

Speaker Change: Some of this where the backlog for 2025 is already higher for DRB new systems versus the back half of this year, with the expectations that interest rates are going to start coming down next year.

Mark Morelli: One thing, Joe, that's encouraging for us is when we are able to compare ourselves to industry benchmarks that are out there, whether it be on Macco, where we think we have very favorable compares, where we're gaining share. Also on GVR year-to-date, we feel like our leadership position here will come our way, particularly because we are much better positioned in the major players out there in the marketplace, and they're continuing to build out that strength there, both well for growth. We're very encouraged by that, and we think we're also able to demonstrate coming into this mid-part of the year that we're gaining share in environmental, which is some pretty obvious compares there.

Mark D. Morelli: You know, one thing that Joe and I are encouraging for us is when we are able to compare ourselves to industry benchmarks that are out there, whether it be on MACCO, where we think we have very favorable comparisons, where we're gaining share, also on GVR, year-to-date. We feel like our leadership position here will come our way, particularly because we are much better positioned among the major players out there in the marketplace, and they And so we're very encouraged by that, and we think we're also able to demonstrate, coming into this mid-part of the year, that we're gaining share in environmental, which is some pretty obvious comparisons there, and environmental is the early innings on a tank upgrade cycle, and we're looking at good growth at the back end of this year.

Speaker Change: You know one thing Joe that's encouraging for us is when we are able to

Speaker Change: where we think we have very favorable compares, where we're gaining share. Also on GVR, year-to-date, we feel like our leadership position here will come our way, particularly because we are much better positioned in the major players out there in the marketplace, and they're continuing to build out. That strength there bodes well for growth.

Speaker Change: And so we're very encouraged by that and we think we're also able to demonstrate.

Mark Morelli: An environmental is early innings on a tank upgrade cycle, and we're looking at good growth at the back end of this year.

Mark Morelli: So we also have some product launches that are coming that we're gaining traction on in Venco. So that business is doing much better than it did in prior years, and it's actually posting double-digit growth, and we feel very encouraged by that build out of that pipeline.

Joseph J. Donahue: So we also have some product launches that are coming that we're gaining traction on in Invenco, so that business is doing much better than it did in previous years, and it's actually posting double-digit growth, and we feel very encouraged by the build-out of that pipeline. So lots of things where our strategy is intact, and we feel very encouraged by, but this soft sort of spot in the market and the pacing of the market are things we're reflecting in our guidance. Perfect.

Speaker Change: So we also have some product launches that are coming that we're gaining traction on and event goals. So that business is doing much better than it didn't.

Speaker Change: and they're all prior years and it's actually posting double-digit growth and we feel very encouraged by that build out of that pipeline. So lots of things where our strategy is intact and we feel very encouraged by, but this soft sort of spot in the market and the pacing of the market, we're reflecting in our guidance.

Mark Morelli: So lots of things where our strategy is intact, and we feel very encouraged by, but this soft sort of spot in the market and the pacing of the market where we're reflecting on our guidance.

Joe Ritchie: Perfect, thank you guys. Thanks, Joe.

Andy Kaplowitz: The next question comes from Andy Kaplowitz with Citigroup. Please go ahead.

Operator: Thank you, guys. The next question comes from Andy Kaplowitz with Citigroup. Please go ahead. Good morning, guys. It's actually Jose here on behalf of Andy.

Jose: Good morning, guys. It's actually Jose here on Brandy. Good morning, Jose. So for my first question, from your updated sales guidance, it seems like you're expecting mobility to be kind of in the high, low single digit range for the year. Despite BRB sounding like it went more or less as you expected, when do you see mobility revenues really begin to reflect back to your longer term high single digit range? Could you talk about the path you're seeing there? Yeah, I think where we see that's quite encouraging, Jose, is around the pipeline of activity, particularly around in Venco.

Jose: Good morning, Jose. So for my first question, from your updated sales guidance, it seems like you're expecting mobility to be kind of in the high, low, single digit, a low mid single digit range for the year despite DRV sounding like it went more or less as you expected. When do you see mobility revenues really beginning to inflect back to your longer term high single-digit range? Could you talk about the path you're seeing there?

Speaker Change: So, for my first question, from your updated sales guidance, it seems like you're expecting mobility to be kind of in the high, low, single-digit.

Mark Morelli: We have this new payment kit co-flex-based six that we talked about. This building strength in the market and we're very encouraged by the uptake there in effects, which is being piloted with a number of larger customers is also making the great progress. And we have enterprise productivity that also includes this what we referenced also in the earnings call called Viz. And so that business we think demonstrates a really good growth driver, mobility technology. The other thing is that in BRB, the backlog there is certainly being impacted by pushouts in the interest rate environment. But there's not building of inventory in the channels.

Speaker Change: [inaudible]

Mark Morelli: We're able to take advantage of a lower interest rate environment fairly quickly in that business. And it's a leadership position where we're launching new products this year both to build out a pathion as well as a recent announcement of a product line called Catalyst that helps businesses be more productive and car wash. So that business is a great business. It's just going to take a step back from a very strong 20 to 25 percent growth rates that we've seen in the last couple of years, but it's a little bit of a digestion period with lower interest rates.

Speaker Change: businesses be more productive in car wash.

Speaker Change: So, that business is a great business, it's just going to take a step back from a very strong 20 to 25% growth rate that we've seen in the last couple of years, but it's a little bit of a digestion period with lower interest rates.

Mark Morelli: So we feel mobility technology's platform is great. If you look at the last couple of years, it's been making significant progress building up that platform, and it's not going to grow as much as we anticipate in the near term, but we do anticipate it coming back to growth based on the strategy that's in place. I'll just add that if you look at that mobility technology business, the businesses in that segment are on track with our longer term projections, except for BRB, which this year is holding back to growth. BRB going into next year will be easier, compare at least for the last three quarters of the year.

Mark D. Morelli: We do anticipate it coming back to growth based on the strategy that's in place. I'll just add that if you look at the mobility technology business, the businesses in that segment are on track with our longer-term projections, except for DRB, which this year is holding back growth. DRB, you know, going into next year will be an easier comparison, at least for the last three quarters of the year, so that should inflect back to growth next year.

Speaker Change: I'll just add that if you look at that mobility technology business, the businesses in that segment are on track with our longer-term projections except for DRB, which this year is holding back the growth.

Mark Morelli: So that should inflect back to a growth next year and BRB yes it's stepped back this year but it's still a great business and a good acquisition when you think about it. Cumulative for the time we've owned it, it's about 50 to 60 million above from operating profit perspective to our acquisition case and it's still tracking add or slightly above our acquisition case this year. Now, Jose, one of the pieces of that platform I'd like to highlight, is a smaller piece, but it's made really good progress, and we're pretty confident, and it's ANG. This is the compressed natural gas, renewable natural gas, also layering in some hydrogen orders and shipments there because we've launched a product line.

Mark D. Morelli: And DRB, yes, it stepped back this year, but it's still a great business and a good acquisition. When you think about it, cumulative for the time we've owned it, it's about $50 to $60 million higher from an operating profit perspective than our acquisition case, and it's still tracking at or slightly above our acquisition case this year. Yeah, Jose, one other piece of that platform I'd like to highlight. It is a smaller piece, but it's made really good progress, and we're pretty confident in it. It's Angie.

Mark D. Morelli: This is compressed natural gas, renewable natural gas, and we're also layering in some hydrogen orders and shipments there because we've launched that product line. That business, if you look back a couple of years ago, was $50 million. It's going to be more than $100 million this year, and it's a longer cycle business. So we're almost fully booked for the year. We're fully booked for Q3, and that business has been digesting a very strong growth rate of over 30%.

Mark Morelli: That business, if you look back a couple of years ago, is $50 million. It's going to be more than $100 million this year. And it's a longer cycle business. So we're almost fully booked for the year. We're fully booked for Q3. And that business has been digesting a very strong growth rate of over 30% growth. So for us, that's managing a growth business. There's a bit of order timing in the quarter. But when you look at Q3, we're fully booked. We're clearly deploying VBS there with our growth couple. There's a lot of capacity that needs to be put in place.

Speaker Change: That business, if you look back a couple years ago, is $50 million. It's going to be more than $100 million this year.

Speaker Change: And it's a longer cycle business, so we're almost fully booked for the year. We're fully booked for Q3.

Mark D. Morelli: So for us, that's managing a growth business. There's a bit of order timing in the quarter, but when you look at Q3, we're fully booked. We're clearly deploying VBF there with our growth capacity that needs to be put in place, but compressed natural gas, renewable natural gas, and a couple orders now coming in on hydrogen, meaning hydrogen is longer term but a great position. But clearly, what we see here is a very good build-out and uptake from customers and just ramping up that growth. I appreciate the color there.

Speaker Change: So, for us, that's managing a growth business. There's a bit of order timing in the quarter, but when you look at Q3, we're fully booked. We're clearly deploying VBF there with our growth capacity that needs to be put in place.

Jose: But compress natural gas from renewable natural gas in a couple orders now coming down on hydrogen. Meeting hydrogen is longer term, but a great position. But clearly what we see here is a very good build out and uptake from customers and just ramping that growth. Got it. Appreciate the color there. As a follow-up, I saw one of the slides you called out high growth in recurring revenue in the quarter for DRB. Could you take a moment and fill us in on where you're at in terms of recurring, recurring revenue now for the company. You got a 30 to 35% by 2026.

Speaker Change: But compressed natural gas, renewable natural gas, and a couple orders now coming in on hydrogen, meaning hydrogen is longer term but a great position. But clearly what we see here is a very good build-out and uptake from customers and just ramping that growth.

Jose: As a follow-up, I saw one of the slides where you called out high growth in recurring revenue in the quarter for DRV. Could you take a moment and fill us in on where you are in terms of recurring revenue now for the company? You got a 30 to 35% by 2026. I would surmise that recurring revenue is still very important to Vontier, not to mention it's usually higher margin. So, A, are you on track? I'm sorry, Jose, I cut you out there at the end.

Speaker Change: Got it. Appreciate the color there. As a follow-up, I saw one of the slides you called out high growth and recurring revenue in the quarter for DRB.

Mark Morelli: I would surmise that recurring revenue is still very important to Launch Air. Not some mention it's usually higher margin. So, are you on track on the news? Sorry, Jose, I cut you out there at the end. Can you repeat the end? Oh, yeah, sure. I was just saying, I was just saying, are you still on track for that in the near term? And is that 30 to 35% still the right estimate to think about? Yeah, so I'll add some color and see if Ensuing also wants to jump in. If you look back at our portfolio since then, that recurring revenue is up about 10 points.

Mark D. Morelli: Can you repeat that? And Anshooman also wants to jump in. If you look back at our portfolio since then, that recurring revenue is is up about 10 points. And what's really important there is not only did we shed some of the business that you know the tire equipment business as an example, not a lot of recurring revenue in it. So about 150 million of of shedding of those type portfolio assets, but we've also built, Our SaaS businesses are certainly growing, you know, the ones that we just talked about here in InEffects, which has a very strong pipeline and buildout inside of our Invenco business is a clear example, Teletrack Navman is certainly doing better, and inside of DRB, which is specifically, if you ask that color, where we've been in the process of launching our new Pathion product, which is fundamentally turning that into a SaaS-based recurring revenue.

Mark Morelli: And what's really important there is not only did we shed some of the business that the tire equipment business, as an example, not a lot of recurring revenue in it. So about 150 million of shedding of those type portfolio assets, but we've also built our SaaS businesses are certainly growing. You know, the ones that we just talked about here in effects, which has a very strong pipeline and build out inside of our Invenco business, is a clear example. Telefac Navman is certainly doing better and inside a DRB and which is specifically asked that color where we've been in the process of launching our new pathion product, which is fundamentally turning that into a fast base, recurring revenue.

Speaker Change: which has a very strong pipeline and build out inside of our Invenco business is a clear example. Teletrack Navman is certainly doing better. And inside of DRB, and which is specifically, you asked that color, where we've been in the process of launching our new Pathion product, which is...

Mark Morelli: And we have more than a thousand software engineers in our business now, which is a big departure from where we were a couple of years ago. So we're pretty encouraged on that. I will also say the aftermarket parts business in GBR has been a big focus, and that had 20% growth last quarter. There was some inventory channel issues in the power quarter, but this has been a major initiative for us to really affect the aftermarket much more concerted in the GBR business. And, you know, we're benefiting from a larger installed base there based on the build out, which is clearly, clearly advantaged here.

Mark D. Morelli: And we have more than 1,000 software engineers in our business now, which is a big departure from where we were a couple years ago, so we're pretty encouraged by that. I will also say the aftermarket parts business in GVR has been a big focus. And that 20% growth last quarter. There were some inventory channel issues in the prior quarter, but this has been a major initiative for us to really attack the aftermarket, much more concerted in the GVR business. And we're benefiting from a larger installed base there based on the buildout, which is clearly, clearly advantaged here.

Speaker Change: And that had 20% growth last quarter.

Speaker Change: There was some inventory channel issues in the prior quarter, but this has been a major initiative for us to really attack the aftermarket Much more concerted in the GVR business, and you know we're benefiting from a larger installed base there

Mark D. Morelli: But we also have new programs like refurbishment of electronics, and we're also penetrating new distribution territories. So we have a very focused management team on the aftermarket, and it's a percent of our sales for GVR. That's definitely on an upswing, and we see real legs there as well. And Anshooman, did you want to add any color?

Anshooman Aga: But we also have new programs like refurbishment of electronics, and we're also penetrating new distribution territories. So we have a very focused management team on aftermarket and it's percent of our sales for GBR. That's definitely on an upswing, and we see real likes there as well. And should we do you want to add any color?

Anshooman Aga: Yeah, I'd just add that we're definitely on track for our 2026 targets that we put out at Investor Day from a recurring revenue perspective. You know, as we innovate and we drive productivity for our customers, that also leads to higher recurring revenue. A simple example is over-the-air updates with FlexSpace 6.

Anshooman Aga: Yeah, I just add that we're definitely on crack for our 2026 targets that we put out at Investor Day from a recurring revenue perspective. You know, as we innovate and we drive productivity for our customers, that also leads to higher recurring revenue. Simple example is over there, over-the-air updates with flex, pay six. So that really is a big drive of productivity for our customers, but also a good source of recurring revenue in the future. NFX has recurring revenue. So we're well on track, and we're making good progress, and recurring revenue continues to grow.

Speaker Change: You know, as we innovate and we drive.

Anshooman Aga: So that really is a big driver of productivity for our customers but also a good source of recurring revenue in the future. And FX has recurring revenue. So we're well on track, and we're making good progress, and recurring revenue continues to grow. Thanks. Good morning, guys.

Speaker Change: Productivity for our customers that also leads to higher recurring revenue. Simple example is over-the-air updates with FlexPay 6.

Jose: Thanks for your time, guys. Appreciate the detail.

Nigel Coe: The next question comes from Nigel Coe, with Wolf Research. Please go ahead. Thanks. Good morning, guys. Hope as well. Thanks for the question. Just a couple of quick ones on some of the details.

Speaker Change: Got it. Thanks for your time, guys. Appreciate the detail.

Speaker Change: Thanks for that.

Jose: Hope all's well. Thanks for the question. Just a couple of quick ones on some of the details.

Speaker Change: Thanks. Good morning, guys. Hope it was well. Thanks for the question.

Unknown Attendee: I apologize if you already covered these. On the environmental delays, and I understand you've covered some of those in 3Q, was weather a factor there? Was it labor availability? Maybe just some comments on that. And then on Matco margins, I think you mentioned timing of reserves. So I'm just wondering how the credit quality is tracking at Matco and whether some of the declines you're seeing are demand driven, or maybe you're being a bit more selective, perhaps in light of credit quality. So any comments there would be helpful as well. Yeah, so let me comment on the first one.

Nigel Coe: I apologize if you were to cover these on the environmental delays, and I'm standing for some of those. What was weather effective there? Was it labor availability? Maybe just some comments on that.

Mark Morelli: And then on Matt Coe margins, I think you mentioned timing of reserves. So I'm just wondering how the criticality is tracking at Matt Coe and whether some of the decline you see is demand driven or maybe you're being a bit more selective, perhaps with in light of criticality. So any comments that would help as well. Yeah, so let me comment on the first one. The weather actually did impact Angie in the quarter. We were pretty constrained with the capacity for growth there. So we're constantly pushing on growth. So we got back and loaded, and unfortunately had six tornadoes in Jamesville, Wisconsin, that where we have our manufacturing facility.

Mark D. Morelli: The weather actually did impact Angie in the quarter. We were pretty. We were constrained with the capacity for growth there, so we're constantly pushing on growth. So we got back-end loaded and unfortunately had six tornadoes in Janesville, Wisconsin, where we have our manufacturing facility there. Thankfully, nobody got hurt, but it took labor out of our equation for the last week of the quarter.

Speaker Change: constrained with the capacity for growth there so we're constantly pushing on growth so we got back and loaded and unfortunately had six tornadoes in Janesville, Wisconsin.

Mark Morelli: Thankfully, nobody got hurt, but it took labor out of our equation for the last week of the quarter. We're using more VBS to pull in that capacity more, and we're exercising more outsourcing so that we don't get as back and loaded, not subjective to that.

Speaker Change: Where we have our manufacturing facility. Thankfully, nobody got hurt, but it took labor out of our equation for the last week of the quarter.

Mark D. Morelli: We're using more VBS to pull in that capacity more and exercising more outsourcing so that we don't get as back-end loaded, not subjective to that. So we're pretty happy with that activity, but unfortunately, it was susceptible to that. And then on the MACO side.

Anshooman Aga: So we're pretty happy on that activity, but unfortunately, was susceptible to that. And then on the Matt Coe side, we really see a volume here and more bad debt coming through back to maybe more some of the lows we've seen historically. But overall, the margins are holding up quite well inside Matt Coe. There's no question there's been some discounting, but we're also going back to our supply chain, and we're getting some more cost out of our supply chain.

Mark D. Morelli: We really see volume here and more bad debt coming through to maybe some of the lows we've seen historically. But overall, the margins are holding up quite well inside MACCO. There's no question there's been some discounting, but we're also going back to our supply chain, and we're getting some more costs out of our supply chain accordingly. Did you want to add anything there, Anshooman?

Speaker Change: Bye.

Anshooman Aga: Do you want to add anything there, instrument? Yeah, a couple of your other parts of your questions from a GVR or environmental and fueling perspective. It wasn't tight to weather or labor constraints. It was just as we mentioned on the prepared remarks. We had order timing slip out as some of our larger customers have prioritized due to industry greenfield, brownfield projects. It's at the expense of retrofit and refresh projects, and the shorter turn projects slipped out from a timing perspective. And then on Matt Coe margins, yes, we are impacted by bad debt reserves. And, as I've said in the past, our write-offs have typically created in a somewhat narrow band.

Anshooman Aga: On a couple of other parts of your questions, from a GVR or environmental and fueling perspective, it wasn't tied to weather or labor constraints. It was just, as we mentioned in the prepared remark, we had order timing slip out as some of our larger customers have prioritized new to industry Greenfield-Brownfield projects at the expense of retrofit and refresh projects, and these shorter-term projects slipped out from a timing perspective.

Speaker Change: We had order timing slip out as some of our larger customers have prioritized new to industry Greenfield-Brownfield projects.

Anshooman Aga: And then on Madco margins, yes, we are impacted by about that reserve. And, you know, as I've said in the past, our write-offs have typically traded in a somewhat narrow band. And post COVID, when there was a lot of money flushed into the economy, we were actually trading at the low end of the band. Last year, we kind of moved to the mid part of the band that we trade in.

Speaker Change: Bad debt reserves. And as I've said in the past, our write offs have typically traded in a somewhat narrow band and a post COVID when there was a lot of...

Anshooman Aga: And post-COVID, when there was a lot of money flushed into the economy, we were actually trading at the low end of the band. Last year, we kind of moved to the mid part of the band that we trade in, and now we're at the high end of the band that we've typically had from a write offs perspective. We're averaging about two million dollars of higher write-offs of quarter versus last year. It really started turning towards Q4 last year, but we did see a step up this year. And that overall credit quality is pretty good over the last couple of years.

Speaker Change: money flushed into the economy. We were actually trading at the low end of the band. Last year, we kind of moved to the mid part of the band that we trade in, and now we're at the high end of

Anshooman Aga: And now we're at the high end of the band that we've typically had from a write-off perspective. We're averaging about $2 million more in higher write-offs a quarter versus last year. It really started turning towards Q4 last year, but we did see a step up this year. And overall, credit quality is pretty good. Over the last couple of years, we've been working to improve credit quality. When we look at 60-day past due balances, they are up versus what they were a year or two ago, but they're still below the credit card industry average, which has gone up to about 2.6 times and a 12-year high for the credit card industry.

Speaker Change: The band that we've typically had from a write-offs perspective. We're averaging about two million dollars of higher write-offs a quarter

Anshooman Aga: We've been working to move up the credit quality when we look at 60-day past new balances. They are up versus what they were a year or two ago, but they're still below the credit card industry average, which has traded up to about 2.6 times and a 12-year high for the credit card industry. So we are trading below that from a 60-day past new, and that's something we continue to manage. The yields on the portfolio are pretty healthy. We yield about 20% interest on the portfolio, so it's still a profitable piece of our portfolio.

Speaker Change: which has traded up to about 2.6x and a 12-year high for the credit card industry, so we are trading below that.

Anshooman Aga: So we are trading below that from a 60-day past due, and that's something we continue to manage. The yields on the portfolio are pretty healthy. We get about 20% interest on the portfolio.

Anshooman Aga: So it's still a profitable piece of our portfolio. Great. Thanks, Anshooman. That's a great color.

Nigel Coe: Great. Thanks, Anshooman. That's great color.

Mark Morelli: And then just a quick one on the ASL, $100 million. Any sense on, you know, when you might pull the trick on that? Well, our intent is to go forward, obviously, in the near term; otherwise, we wouldn't be talking about it. We believe that this is a right way to deploy capital with a good return backdrop for it. So we're confident that's the right positioning that will take advantage of this near-term softening.

Unknown Attendee: And then just a quick one on the ASR, the $100 million. Any sense on when you might pull the trigger on that? Well, our intent is to go forward, obviously in the near term; otherwise, we wouldn't be talking about it. We believe that this is the right way to deploy capital with a good return backdrop for it. So, we're confident that's the right positioning that will take advantage of this near-term soft. And Nigel, we have to wait for the trading window to open also.

Speaker Change: Well, our intent is to go forward obviously in the near term, otherwise we wouldn't be talking about it.

Anshooman Aga: And Nigel, we have to wait for the trading window to open. Right. Yeah.

Mark D. Morelli: Bye. Yeah, thanks. Thanks, guys. Again, if you have a question, please press the star key, then 1, about what portion is sort of temporary versus structural. And what I'm really trying to get at is what do you think is the full year savings in 25? Yeah, about two-thirds of those savings are structural and permanent. And then there's some temporary savings in there, obviously.

Operator: Thanks, guys. Again, if you have a question, please press the star key, then one.

Speaker Change: Again, if you have a question, please press the star key, then 1.

David Ridley: The next question comes from Andrew Obin with Bank of America. Please go ahead.

Speaker Change: The next question comes from Andrew Obin with Bank of America. Please go ahead.

David Ridley: Hi, this is David Ridley and on for Andrew. You know, very much appreciate the transparency here. Just a clarification question, you know, on the 12 million of in-year savings on this restructuring actions, you know, about what portion is sort of temporary versus structural. And what I'm really trying to get at is what do you think is the full-year savings in 25? Yeah, about two-thirds of those savings are structural and permanent. And then there's some temporary savings in there, obviously. Got it.

Speaker Change: Clarification.

Unknown Attendee: Got it. Thank you. And then just to check back in on sort of the pipeline of Infinco prospects, how those pilot projects are progressing. Thank you. The next question comes from David Rasso with Evercore ISI. Please go ahead.

David Ridley: Thank you.

Mark Morelli: And then just to check back up on sort of the pipeline of the Finco prospects, how those pilot projects are progressing. Thank you. Yeah, David, they're progressing quite well. It's something we're pretty close to their large players that see not only the advantages and payment but also in some of their enterprise productivity more of a site management capability that incorporates loyalty into that as well. So we're really happy with the progress we're making on the Finco. I think it's a great platform with fitting the needs that the market really has right now.

Andrew Obin: Got it, thank you. And then just to check back up on sort of the pipeline of Infinco prospects, how those pilot projects are progressing. Thank you.

Mark Morelli: So I don't think we're coming up with technology that is needed, you know, that is out there, that is sort of pioneering this guy. This is absolutely solving their high-value problems of running their enterprises better. And so hopefully we'll be able to update you with that, with some press releases here. Excellent.

David Rassow: Next question comes from David Rassow with Evercore ISI. Please go ahead.

David Rassow: Hi, thank you. My question's on DRB. I think you made a comment: return to growth in 25. And I recall you mentioned earlier in the call about backlog being up. Can you remind us the size of the backlog roughly to sales and that type of business? I know it depends; you know, if projects being delayed, maybe it's higher than normal. But just trying to get a comfort level with 25 returns to growth in part on the backlog while, of course, I appreciate if rates get low.

David Emerson Ridley: Can you remind us the size of the backlog, roughly the sales, and that type of business? That's helpful. And rates coming down, in your mind, is that simply the projects that have been pushed to the right? Yeah, so. The backdrop on rates coming down clearly causes some uncertainty. All right. So, the first thing I want to prove is that the industry will consolidate, maybe not at the same rate of build-out of new sites as it did, because that was pretty frothy. And in fact, that was something we didn't anticipate how frothy it would get, but we think that it will go back to kind of a normal growth rate.

Mark Morelli: Ward, hopefully it releases a few projects to get going, but can you help us a bit with the backlogs comment? Yeah, so really if you look at the backlog, there are two pieces to the backlog. One is the recurring revenue piece of the backlog, where we basically for at least Lord of the long term service agreements and software support agreements, we have 12 months that we put in backlog. And that part of the business remains strong. The recurring revenue grew Lord of the digits again in this quarter, so that that business is still growing. Now, from the new systems perspective, this is a shorter book and turn kind of a business for us, but we have about 20% off the new systems revenue for next year, I would say, in backlog already.

Speaker Change: And that part of the business remains strong, the recurring revenue grew low double digits again in this quarter, so that business is still growing.

Mark Morelli: That's helpful, and rates coming down in your mind, is that simply the projects that have been pushed to the right or just to get across the finish line to go ahead and execute the project? Or do you also foresee, from conversations in the channel, as rates come down, we go back to private equity, consolidating the industry, helping your cause for more professional scaled car washes. Yeah, so the backdrop on rates coming down is clearly causes some uncertainty. If you step back and sort of understand the trend that has occurred here, and we have a leadership position, the industry is being built out but also consolidating.

Speaker Change: That's helpful. And rates coming down in your mind.

Speaker Change: Is that simply the projects that have been pushed to the right or, you know, just to get across the finish line to go ahead and execute the project? Or do you also foresee from conversations in the channel, as rates come down, we go back to private equity, consolidating the industry, helping your cause for, you know, more professional, scaled...

Mark Morelli: And you know, but as you mentioned here, David, that this is clearly being impacted. Why would people go forward at that same rate or pace, particularly with rates beginning to come down sometime here in the future? And so what we believe happens as the interest rates improve is that there's also that industry will consolidate, maybe not the same rate of build out of new sites as it did because that was pretty frothy. And in fact, that was something we didn't anticipate how frothy it would get, but we think that it will go back to kind of a normal growth rate.

Speaker Change: And, you know, but as you mentioned here, David, that that's clearly being impacted. Why would people go forward at that same rate or pace, particularly with, you know, rates beginning to come down sometime here in the future?

Speaker Change: And so what we believe happens as the interest rates

David: you know, improve.

Speaker Change: And, in fact, that was something we didn't anticipate how frothy it would get.

Mark Morelli: But also, the industry consolidation benefits us. We have the leading point of sell system out there with all the major players, and as they buy up smaller players, are going to want to consolidate this because they're looking at better productivity. The key that this softness in the market has really shown in the car wash industry is that the benefit of crews of the folks that run a good car wash because it can make a big difference on how much cash flow you generate in a year if you operate a good car wash. So you're going to want to consolidate your platform.

Mark D. Morelli: But also, industry consolidation benefits us. We have the leading point-of-sale system out there with all the major players. And as they buy up, smaller players are going to want to consolidate this because they're looking at better productivity. The key that softness in the market has really shown in the car wash industry is that the benefit accrues to the folks that run a good car wash because that can make a big difference in how much cash flow you generate in a year if you operate a good car wash.

Speaker Change: The key that softness in the market has really shown in the car wash industry is that the benefit accrues to the folks that run a good car wash because it can make a big difference on how much cash flow you generate in a year if you operate a good car wash. So you're going to want to consolidate your platform, you're going to want better productivity.

Mark D. Morelli: So, you're going to want to consolidate your platform. You're going to want better productivity. And this comes our way, because we're the leader in the industry, and we have the tools that enable them to do that. I appreciate the color. The next question comes from Robert Mason with B-A-I-R-T. Please go ahead.

Mark Morelli: You're going to want better productivity, and these come our way because we're the leader in the industry, and we have the tools that enable them to do that.

David Rassow: I appreciate the color. Thank you.

Speaker Change: I appreciate the call. Thank you.

Robert Mason: The next question comes from Robert Mason with B.A.I.R.T. Please go ahead. Yes, good morning. That's Robert Mason with B.A.I.R.T. The again appreciate the added detail. It's helpful. Just some of the bridge on your sales guidance. I just wanted to be clear in mobility technologies. You seem to be apportioning all of the delta in outlook to DRB. I just wanted to make sure that was the case and is that kind of an outlook. It had you made any changes to any of the other businesses. It even sound like, you know, in Vinco, I'm not sure if it's trending better than expected or not, but you know some positive commentary there.

Operator: Yes, good morning. It's... Rob, that's correct. All the changes in DRB.

Rob Mason: Rob Mason with Barrett.

Speaker Change: Again, appreciate the added detail, it's helpful. Just some of the bridge on your sales guidance. I just wanted to be clear, in mobility technologies you seem to be apportioning all of the Delta

Rob Mason: and Outlook to DRB. I just wanted to make sure that was the case and is that

Speaker Change: Yeah, kind of a net outlook. Had you made any changes to any of the other businesses? It even sounds like, you know, Invenco, I'm not sure if it's trending better than expected or not, but, you know, some positive commentary there. So is all of the change just within DRB?

Robert Mason: So is all of the change just within DRB? Rob, that's correct. All the changes in DRB; the other businesses are tracking as expected. In Venco, should be up high single digits this year. Our Angie business should be up low double digits. Evolved continues to grow at a pretty good clip rate and then telecrack business. The turnaround continues to progress well, and they should be up low single digits this year. So all just with it Madco, I think you also commented just franchise-y growth was flat sequentially.

Robert W. Mason: The other businesses are tracking as expected. Invenco should be up high single digits this year. Our Angie business should be up low double digits. Evolve continues to grow at a pretty good clip rate.

Mark D. Morelli: And then Telecrack business, the turnaround continues to progress well, and they should be up low single digits this year. So all the other businesses are tracking as expected. And then just within Madco, I think you also commented just franchisee growth was flat sequentially. How is the backdrop impacting your ability to bring on new franchisees as well? Any impact there, and what are the expectations for the year on that component?

Speaker Change: business, the turnaround continues to progress well and they should be up low single digits this year. So all the other businesses are tracking as expected.

Speaker Change: and then

Speaker Change: You also commented just franchisee growth was flat sequentially. How is the backdrop impacting your ability to bring on new franchisees as well? Any impact there and what the expectations are for the year?

Mark Morelli: How was the backdrop impacting your ability to bring on new franchisees as well, any impact there and what the expectations are for the year on that component? Yeah Rob, what we've done with our approach on franchisees and really the end of last quarter into this quarter is we started to make a more discerning look that if franchisees were not contributing as much and sort of lower end, that we were actually going to focus more on taking them out of the network. And we've had more of a fresh approach on how we track folks in this market.

Mark D. Morelli: Yeah, Rob, what we've done with our approach to franchisees and Mark Morrelli, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee that we hope will clear up post-election regardless of who gets elected, but we do feel like we have a new program underway for the back half of this year that we can hopefully gain traction with and hopefully we'll get the benefits of some improving interest Does that result in net growth this year, Mark, in franchising year-over-year for the full year, or where do we end up?

Speaker Change: on that component.

Mark Morelli: I think there's no question that there's a little bit of trepidation with folks stepping into a new business with some of this interest rate macro uncertainty that we hope will clear up post election, regardless of who gets elected. But we do feel like we have a new program underway for the back half of this year that we can hopefully gain traction with, and hopefully we'll get the benefits and some improving interest rates and some clear up on the election uncertainty. Does that result in that growth this year, Mark, in franchise that year over year for the full year, or do we interrupt?

Speaker Change: that there's a little bit of trepidation with folks stepping into a new business with some of this interest rate macro uncertainty.

Speaker Change: Does that, does that result in that?

Speaker Change: Growth this year, Mark, and franchising year-over-year for the full year, or where do we end up?

Robert Mason: We're looking at growth in the second half of the year in terms of how that grows out. You know Q1 was down; we're flat in Q2, so in terms of its total netting out the positive growth, not quite sure, but it's definitely a flatish outlook for full year. Would that mean there's a recovery in second half on franchisees? That's it. Okay. Thank you. Thanks a lot.

Mark D. Morelli: We're looking at growth in the second half of the year in terms of how that grows out. You know, Q1 was down, and we were flat in Q2. So in terms of its total netting out to positive growth, not quite sure, but it's definitely a flattish outlook for the full year.

Robert W. Mason: Okay. Thank you. Thanks, Rob. Thanks, Kenneth.

Operator: Ladies and gentlemen, this concludes our question-and-answer session.

Rob: Thanks, Rob.

Speaker Change: Ladies and gentlemen, this concludes our question and answer session.

Mark Morelli: I'd like to turn the conference back over to Mark for any closing remarks. Please go ahead. Thanks, Kenneth. We continue to make solid progress in delivering differentiated solutions for our customers as they expand, modernize, and decarbonize our footprint. Frontier has a unique competitive advantage within the mobile ecosystem. It is purpose-built and it is a portfolio of connected hardware and software solutions. We call this our connected mobility strategy, and it places us at the forefront of our customer's digital transformation, and it also supports their multi-energy infrastructure needs. And finally, I do want to make comment that we continue to allocate capital in a responsible way for every and hard return options that deliver value to our shareholders.

Mark D. Morelli: We continue to make solid progress in delivering differentiated solutions for our customers as they expand, modernize, and decarbonize their footprint. Vontier has a unique competitive advantage within the mobility ecosystem. It is purpose built, and it is a portfolio of connected hardware and software solutions. We call this our Connected Mobility Strategy, and it places us at the forefront of our customers' digital transformation, and it also supports their multi-energy infrastructure needs. And finally, I do want to make a comment that we continue to allocate capital in a responsible way to deliver higher return options that deliver value to our shareholders.

Kenneth: Thanks, Kenneth.

Speaker Change: We continue to make solid progress in delivering differentiated solutions for our customers as they expand, modernize, and decarbonize our footprint. Vontier has a unique competitive advantage within the mobility ecosystem. It is purpose-built, and it is a portfolio of connected hardware and software solutions.

Mark D. Morelli: And I'd be remiss without talking about the efforts of our teams across the world. I'd like to extend a thanks to our teams for their dedication and their focus on delivering for customers and their incredible efforts to significantly improve our business, as well as to recognize their hard work every day. So with that, we appreciate your continued interest in Vontier. Have a good day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: We call this our Connected Mobility Strategy, and it places us at the forefront of our customers' digital transformation, and it also supports their multi-energy infrastructure needs.

Speaker Change: And finally, I do want to make comment that we continue to allocate capital in a responsible way for every higher return options that deliver value to our shareholders.

Mark Morelli: And I'd be remiss without talking about the efforts of our teams across the world. I'd like to extend a thanks to our teams as their dedication and their focus of delivering on customers and their credible efforts to incredibly improve our business, as well as it's important to recognize their hard work every day. So, with that, we appreciate your continued interest in volunteer.

Speaker Change: And I'd be remiss without talking about the efforts of our teams across the world.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.