Q4 2024 Dover Corp Earnings Call
See you later.
Rich: Our comments today will include forward looking statements based on current expectations actual results and events could differ from those statements due to a number of risks and uncertainties, which are discussed in our SEC filings, we assume no obligation to update our forward looking statements with that I will turn the call over to rich.
Jack and good morning, everyone, let's start on page.
Rich: Overall, we are encouraged by the fourth quarter topline performance was broad based with four out of five segments posting positive organic growth.
Rich: While underlying demand across the portfolio.
Rich: Bookings were up 7% organically in the quarter driven by robust order rates in our secular growth expose markets as well as positive inflection in.
Rich: Several end markets that are tough comps during the year, our bookings strength validates our previous demand outlook for 2025.
Rich: Segment margin performance for the quarter was solid at 22, 2% up 60 basis points over the prior year, we're quite encouraged by.
Rich: By the product mix impact in prior period fixed cost restructuring on segment margins during the quarter.
Rich: We expect this to be a precursor of the strong incremental margin performance that we expect in 2000.
Rich: Excluding the 25 cents of tax reorganization benefit to our effective tax rate in the fourth quarter of the prior year Q4, adjusted EPS grew 14% in the quarter and was up 8%.
Rich: Sure.
Rich: Our operational results were complemented by our ongoing portfolio actions.
Rich: We recently closed two bolt on acquisitions within our high priority pumps and process solutions segment, and our acquisition pipeline remains robust we ended the year with a significant cash position that provides us flexibility as we pursue pursue value creating capital deployment to further expand our businesses.
Rich: In high growth high margin priority platforms through organic investment and acquisitions.
Rich: We are optimistic about 2025 underlying demand strength has continued across the portfolio into January we.
Rich: We have significant runway for margin improvement through organic growth positive mix benefits and numerous cost and performance levers we have high confidence in dover's attractive end market exposures flexible business model and proven execution playbook.
Rich: This backdrop, we are poised to deliver double digit EPS growth in 2025 through a combination of accretive topline growth margin improvement and value creating capital allocation.
Rich: Well that's just.
Rich: Slide five.
Rich: Engineered products was up 2% organically in the quarter on volume growth in vehicle service and fluid dispensing aerospace and defense was lower in the period due to shipment timing, but still posted a record year on growing global demand for signal intelligence and electronic warfare solutions.
Rich: Clean energy and feeling was up 8% organically in the quarter led by robust order rates and shipments within cryogenic and clean energy components as well as solid volume growth in retail fueling equipment.
Rich: Our north American above ground fueling businesses.
Rich: <unk> building back to volumes from peak in the cycle from several years ago. Importantly, there was notable growth inflection in mix accretive vehicle wash and below ground retail fueling in the quarter, which had faced tough market conditions over the last two years.
Rich: Margin was up 200 basis points in the quarter on positive volume leverage attractive mix.
Rich: And operational execution we.
Rich: We expect these trends to continue to drive margins higher.
Rich: In 2025.
Rich: [noise] imaging and identification posted another solid quarter with growth in core marketing coding printers consumables services and aftermarket parts margin performance was robust as management actions on cost to serve and structural cost controls continue to drive incremental margins.
Rich: Pumps and process solutions up 3% organically on robust shipments in single use biopharma components and thermal connectors, both of which posted year over year bookings growth in excess of 100% in the quarter.
Rich: Decision components and industrial pumps at a solid results as well as forecasted the long cycle polymer processing processing equipment was down year over year.
Rich: In the period, but was flat sequentially segment revenue mix drove a 230 basis points of margin improvement on excellent production performance on volume growth in Biopharma and thermal and margin mix benefits from the FW Murphy acquisition.
Rich: Revenue was down in the quarter and climate sustainability technologies unexpected declines in European heat exchanges, and beverage, making Canada can making equipment.
Rich: Which more than offset the record quarterly volume and U S. C O two refrigeration systems and growth in heat exchanges in the U S and Asia our.
Rich: Our shipments of heat exchanges for heat pumps in Europe did improve sequentially in the quarter a trend we expect to accelerate in the back half of 2025 is the end market recovers.
Rich: <unk> bookings were up 16% in the quarter with positive.
Rich: That's them across each operating business with particular strength in C O two systems.
Rich: Passenger Brad here. Thanks, Rich good morning, everyone. Let's go to our cash flow statement on slide six adjusting for taxes paid on the gains on dispositions, which are non operational in nature, our free cash flow was $429 million in the quarter or 22% of revenue.
Rich: Our fourth quarter was our highest cash flow quarter of the year in line with historical trends we.
Rich: We are pleased with our full year <unk>.
Rich: Full year adjusted free cash flow generation, which came in at 13, 5% of revenue within our guidance range. Despite carrying large accounts receivable balances at the at the year end.
Rich: That will be a credit to our early 2025 cash generation.
Rich: Our guidance for 2025 free cash flow is 14% to 16% of revenue on strong conversion of operating cash flow. We are forecasting slightly higher capex in 'twenty 'twenty five on several growth investments with that I'll turn it back to rich. Thanks, I'm on slide seven here, we provide a little more detail on the bookings momentum.
Rich: Some in the fourth quarter Q4 marked our fifth consecutive quarter of positive year over year bookings growth posting a book to bill above one as shown in the segment detail on the right. The bookings rates were broad based with particular strength in our secular growth exposed markets, providing a strong foundation as we move into 2025.
Rich: Slide eight highlights several end markets that were driving our consolidated organic growth forecast between end market data, our customer forecasts and our own bookings rates. We are encouraged with the outlook and the broader industrial gas complex within clean energy and precision components single use biopharma components C O two refrigeration system.
Rich: <unk> and inputs into liquid cooling applications of data centers, which include our connectors as well as heat exchangers we.
Rich: We have made significant organic and inorganic investment behind these end markets, which will continue to prioritize into 2025 in aggregate. These markets now account for 20% of our portfolio and drive attractive margin accretion unexpected double digit growth rates.
Rich: Moving to slide nine we expect engineered products to grow low single digits organically and sustained strong orders and shipments within aerospace and defense, which should be levered to the second half of the year due to the timing of government programs.
Rich: The divestitures of <unk> and Avaya Flyer metal service solutions group in 2020 for our engineered products segment now accounts for roughly 15% of our total portfolio.
Rich: Down 25% in the prior year.
Rich: We are optimistic about the growth outlook in clean energy and fueling which should return to positive volume growth due to strength in clean energy components fluid transport and above ground fueling we expect this segment to be among the leaders in margin accretion in 2025 on volume leverage positive mix from below ground fueling. Additionally, we think so.
Rich: <unk> additional carryover of multiyear restructuring actions and acquisition integration benefits, which will primarily accrue in the second half of the year.
Rich: We expect imaging the idea to continue its long term steady growth trajectory given its significant reoccurring revenue base and solid demand profile across all geographies management has done yeoman's work to improve the margin here through productivity and structural cost controls and we believe there are multiple years ahead of continued.
Rich: Accretion.
Rich: Underlying demand trends across pumps and process solutions remained solid shipments of single use biopharma components should continue their double digit growth rate driven by production growth in blockbuster drugs and the emergence of novel technologies, such as cell and gene therapies and the continued secular shift towards single use.
Rich: The outlook for thermo connectors for liquid cooling data centers is robust our preemptive capacity expansion has allowed us to maintain industry best lead times and what has turned out to be a short cycle business. Our precision components business is directly leveraged to energy complex investments. So we are quite interested to see.
Rich: Yeah.
Rich: Plays out in 2025.
Rich: Finally climate and sustainability sustainability technology should recover well as difficult comps roll off and heat exchanges in beverage can making with the recent launch of our high capacity platform and Cotr refrigeration systems, we have the broadest product offering in the industry. We are currently taking orders well into the <unk>.
Rich: Half of 2025 and should continue to grow at double digit rate due to the broad based adoption among national retailers heat exchange, you're expected to grow as European E. Comm channel inventories have been largely depleted we are forecasting sustained growth in north American heat exchangers, we have completed our capacity.
Rich: Spansion for large format production driven in part by liquid cooling applications and data centers.
Rich: Our Guy let me finish up on slide 10, our guidance. This year is a bit unique since we provided a preliminary outlook for 'twenty five during last quarter's earning release released which we felt was necessary given the significant portfolio moves completed in Q4 2025 guidance is in line that premier alert preliminary.
Rich: <unk> outlook from a quarter ago in terms of organic revenue and EPS growth with the underlying building blocks intact. There's only been one noteworthy change from last quarter, which is heightened foreign exchange translation headwinds from the strengthening U S. Dollar while this incremental headwind, which is by no means unique to <unk>.
Rich: We are confident in holding our full year guide due to the positive and broad based bookings momentum we had during the year, so pretty much we're going to eat everything that we.
Rich: We saw when we ran.
Rich: From October to January in terms of FX switches.
Rich: Not a little bit we enter 2025 and advantage cash position, our preference is to deploy capital towards organic growth investments and our inorganic.
Rich: Pipeline, which has improved in both quantity and quality.
Rich: Opportunities over the last several months rest assured we will proceed with the capital discipline that we've demonstrated in the past.
Rich: Finally, before I move to Q&A.
Rich: I'd like to take a moment to recognize and congratulate Brad on his retirement.
Rich: Since joining Dover over 15 years ago. He has been instrumental strategic and financial leader, who has helped transform Dover to our current operating structure today I'm sure Brad couldn't think of a better send off spend his last days preparing for this earnings call on behalf of all of US. Thank you and we wish you.
Rich: All the best.
Brad: Thank you for that rich much appreciated.
Chris: Absolutely the pleasure to work with you the entire Dover team, our board and of course, the finance organization for so many years Chris.
Chris: Kris Wenker, we'll take it from here and I wish him the very best Okay. I think we can go to Q&A here Jack.
Chris: Thank you and ladies and gentlemen, if you would like to ask a question simply press Star then the number one on your telephone keypad.
Chris: Like to withdraw your question. Please press star two we ask that participants limit themselves to one question and one follow up question.
Chris: We will now take our first question from Steve Tusa with Jpmorgan. Please go ahead.
Steve Tusa: Hey, good morning, Hi.
Chris: Hi, good morning.
Speaker Change: Brad Congrats and thanks for all the help over the years.
Speaker Change: <unk> definitely seen <unk> seen a lot there are a lot of lot of change so congrats.
Speaker Change: Congrats on the run.
This slide.
Speaker Change: Last quarter talked about 40% conversion and 25 million of restructuring benefits.
Speaker Change: This slide says 40% plus.
Speaker Change: Are you still assuming the 25 million of restructuring benefits and I don't know that Theres a lot of like up arrows on that margin slide so.
Speaker Change: Just maybe.
Speaker Change: To help calibrate us a bit on you know.
Speaker Change: The margin drivers and.
Speaker Change: And price cost.
Speaker Change: Sure like the restructuring benefit hasn't changed as I mentioned last quarter, we will we've got some more in the pipe.
Speaker Change: And when we do it we will give you the roll forward benefit of it which is not embedded into our forecast presently.
Speaker Change: The balance of it is mix.
Speaker Change: So if you look at the margin accretion that we saw in Q4 I think it's a pretty good precursor of what we can expect and then we'll see from there and then it's just a question of kind of the volume that we see so right now.
Speaker Change: We're going to stick to the 40 I think.
Speaker Change: I don't see that going up on a percentage basis. It will be more tied to or are we underestimating the revenue growth potential into 2025 bookings look great, but let's see let's get through a quarter or two.
Speaker Change: Got it and price cost.
Speaker Change: What do you what do you guys assume for priced on the year and well that spread be positive.
Speaker Change: It will be positive.
Speaker Change: Not a lot either way in terms of benefits, maybe a point point and a half we will see it depends on the mix that we get but it will be positive.
Speaker Change: Okay.
Speaker Change: Thanks, a lot thanks again, Brad congrats.
Speaker Change: Thank you and next we'll take a question from Nigel Coe with Wolfe Research. Please go ahead.
Nigel Coe: Thanks, Good morning.
Speaker Change: Brian I'm sure you're going to get a lot of.
Speaker Change: Installation of ethanol that but you've been adobe for a long time, you've been the ones that are constant for the last 15 years. So.
Speaker Change: It's quite a quite a moment here. So congratulations. Thank you. Thank you so much.
Speaker Change: No no.
Speaker Change: Rich you mentioned January and whenever you mentioned sort of a carrier.
Speaker Change: Within the computer with box a bit of tension.
Speaker Change: So I'm just I'm just curious if you if you think that tariffs or potential tariffs.
Speaker Change: Causing any sort of unusual behavior around the supply chain that you touch.
Speaker Change: No we don't see it I mean generally speaking our proximity manufacturer so our backlogs are.
Speaker Change: More influenced on the lead times of the individual product sales, which are kind of all over the place between the short cycle long cycle.
Speaker Change: We don't see any lets get in front of this because we think that there's going to be tariffs. We have a few businesses that are global in nature, but the vast majority of it is proximity.
Speaker Change: Okay. Okay, and then just a quick question on the.
Speaker Change: The market outlook.
Speaker Change: You mentioned CF is going to be the margin leader.
Speaker Change: I'm just curious if you could just maybe just if I could just ask at the 20% plus handle would be reasonable that just just based on what we saw this quarter and then similar vein with Dps just given the exit rate what a what a 30 handle be reasonable for this year.
Speaker Change: Okay.
Speaker Change: Look I think that the absolute change in margin, we would expect in D. C F.
Speaker Change: We are driving.
Speaker Change: At the segment level in excess of 20 alright.
Speaker Change: Alright, you may not get it.
Speaker Change: Every quarter, depending on the cyclicality of it but clearly at an exit rate in excess of of of 'twenty.
Speaker Change: D PPS its all about the mix. So if we're if we're under calling.
Speaker Change: Biopharma and we get better results there that clearly they will mix up.
Speaker Change: But.
Speaker Change: Precision components does better it's a little bit dilutive, but it's still at 25% margin. So we'll take it all day long so it's more a question of.
Speaker Change: What we get in terms of mix going from here.
Speaker Change: Okay fair enough. Thanks rich thanks.
Speaker Change: Yes.
Speaker Change: Thank you we'll next go to Andy Kaplowitz with Citigroup. Please go ahead.
Andy Kaplowitz: Good morning, everyone.
Speaker Change: Hi, Andy.
Andy Kaplowitz: Thanks for all your help congrats.
Speaker Change: Rich. Thank you book to book to Bill over one again in Q4, you're thinking 'twenty five is another year, where all or most of your quarters could achieve book to bill at or over one and I know youre expecting an inflection in C. O. Two orders it looks like you've got that and you mentioned the double digit expected growth in that business is expected to continue but give them recovering other dcs tea business.
Speaker Change: He is at least in terms of orders. It seems like you expect do you see as two bookings momentum to continue maybe you can comment on that.
Speaker Change: Yeah, I mean, I would expect based on our growth rate will hover around one I mean, I don't think we'd get all excited if it's nine H one quarter.
Speaker Change: But we should hover around one for the year and then we'll make a call on Q4 as we exit.
Speaker Change: Yeah, I mean, we did we did get some bookings in Q4 in C. O. Two systems, we've got a lot coming our way. So I would expect bookings to look good there coupled with the fact, maybe not in Q1, but as we go into Q2 will inflect positive bookings and heat.
Speaker Change: So that will help in terms of the.
Speaker Change: Yes.
Speaker Change: Got it and then can you give us a little more color into how you think about earnings earnings cadence through the year. It seems like we started out pretty slowly in terms of organic growth in Q1, given Dcs T N D P could start slowly.
Speaker Change: The more color on Q1, and the trajectory for the rest of it would be helpful.
Speaker Change: Yeah, I mean I'll go back to now that we're beyond kind of all the Covid stuff. It will go back to you know, we'll start off a little slowly.
Speaker Change: We'll probably build a bunch of inventory in Q1 that will recognize those revenues in Q2 and Q3 and then Q4 like every other year, we will decide on the outlook of 25, how we run production, but we'll make those decisions in the August September timeframe. So yeah, I mean, I think that that I think core.
Speaker Change: Third quarter will look will look okay, but I mean, it will be a ramp into Q2 and Q3.
Speaker Change: Appreciate the color.
Speaker Change: Thanks.
Speaker Change: Thank you and our next going to take our next question from Joe Ritchie with Goldman Sachs. Please go ahead.
Joe Ritchie: Hey, guys good morning, and Brad. Thanks, So much with you nothing that the best thank.
Speaker Change: Thank you.
Speaker Change: <unk>.
Speaker Change: Maybe maybe let's just I'll just phoned my question then on D. C. S T.
Speaker Change: Rich maybe talk a little bit about like what you're seeing in that European heat pump market now expecting growth in 2025, I think you maybe mentioned inventories have also stabilized there just give us some color on what you're seeing there.
Speaker Change: I mean, the margin performance that you see for us in Q4 as us basically under producing severely so it was a willful attempt to force inventory clearing out of the channel.
But having said that orders inflected positive relate lets not get excited off of some pretty low levels. So I would say that we did our part to allow inventory to clear.
Speaker Change: And just sequentially orders are coming up it's probably still got a bad comp in Q1.
Speaker Change: But then from there we would expect.
Speaker Change: To ramp over the balance of the year, what that ramp looks like we're taking our best estimates right now as you know getting good data out of [laughter] out of our own customers has been quite difficult, but we would expect I think that we've got a prudent outlook for it.
Speaker Change: And hopefully it gets sequentially better over the year, but what we're confident about is we took some direct action to allow inventory to clear in the back half of the year.
Speaker Change: Got it.
Speaker Change: That makes a lot of sense. So as you think about then kind of like the right starting point for margins for that segment.
Speaker Change: Given given that you took that big hit in the fourth quarter like how do you think about the margin trajectory in 2025. It would seem like you should get some pretty good margin expansion in that business, yes, I mean, once we lap a Q1 Q1 is always a little bit messy because in traditional refrigeration equipment.
Speaker Change: It's not a heavy shipment month, we tend to build inventory there as opposed to shipping it and as I said.
Speaker Change: Sweat and heat exchangers has probably got a tough comp there.
Speaker Change: Having said all of that that we work very pleased with the margin that we got the exit margin that we got a refrigeration. So that's what we're booking in for the balance of the year and to the to the extent.
Speaker Change: We underproduce, so severely and heat exchangers, we have like negative fixed cost absorption. There in Q4, we would expect that to get better over time. So.
Speaker Change: Net net if you just look through the downturn in heat exchangers with all the progress that we've made on refrigeration. We would expect that we would be maybe not at record margins because I'd have to kind of triangulate for bell back a little bit.
Speaker Change: But you know some very good margins in that segment, if we were to bench market historically.
Speaker Change: Yes.
Speaker Change: Great to hear thanks, guys. Thanks.
Speaker Change: Thank you. Our next question will come from Brett Linzey with Mizuho. Please go ahead.
Speaker Change: Thanks, Good morning, and best of luck to Brad.
Speaker Change: Thank you.
Speaker Change: Hey, I wanted to come back to the bio orders are really strong I guess any detail in the nature of the applications, you're winning and any concentration is there one or two customers is it fairly broad based and then how should we think about that delivery schedule.
Speaker Change: It is broad based.
Speaker Change: You know.
Speaker Change: We cleared inventory.
Speaker Change: In the back half or the front half of this year.
Speaker Change: And then just started orders inflected.
Speaker Change: More or less at the end of second quarter.
Speaker Change: We don't know a lot in terms of where it ends up because it is a big portion of that sell through from our clients at the end of the day.
Speaker Change: But I think I would categorize categorize it as we.
Speaker Change: We are a supplier to end use production.
Speaker Change: And that the inventory is cleared out of the system and that those units are operating now and its just pull through.
Speaker Change: Yes, It makes sense and then just a follow up on the liquid cooling very very strong demand again, obviously with everything.
Speaker Change: Everything that's going on but maybe talk about that specification process with those partners and how large has the total addressable market for Dover grown over the last couple of years and where do you think your share of that can run.
Speaker Change: While it has grown significantly because you know it was a traditional product of ours that had been supplied into supercomputing applications.
Speaker Change: What the Tam is is anybody's guess right now if you go back and look at the transcript.
Speaker Change: I think we made the right decision in terms of having the product available and we made the right decision to build out the capacity in advance.
Speaker Change: Of the demand because it has turned out what I would've thought to be a business that would have.
Speaker Change: Because of the build out time for these data centers that we you would you would know when the orders are coming it's turned out to be a very short cycle business for us. So the data that we get or where the product is going is almost at the last minute and now we've been a market share winner here because we've got the capacity installed.
Speaker Change: To the detriment of some of the working capital I would say in the fourth quarter of this year.
Speaker Change: I can't even give you Tam numbers quite frankly, I don't think anybody knows we will see how it plays out.
Speaker Change: But right now.
Speaker Change: Super proud of the management team in terms of how they manage day credibly complex situations.
Speaker Change: I appreciate the detail.
Speaker Change: Thank you. Our next question comes from Michael Halloran with Baird. Please go ahead.
Michael Halloran: Hey, good morning, everyone and congrats Brett so thank you.
Michael Halloran: It's another high level question here just to make sure I understand the cadence through the year.
Michael Halloran: And in answer to the earlier questions. The thought process. Then you know I think about typical earnings by quarter relatively normal or a little a little subdued in the first and then build it up in the back but then.
Michael Halloran: Related are you see are you basically assuming the underlying demand dynamics are relatively stable with current levels not improving not getting worse, but relatively stable and normal sequential is that the thought process I think the sequential should be relatively stable and typically from a.
Michael Halloran: <unk>.
Michael Halloran: The calendars Asian point of view, so there's nothing in the mix benefit should be relatively stable.
Michael Halloran: But when we're talking about the incremental growth on the roll forward, then youre going to get the most of the growth in Q2 and Q3.
Michael Halloran: So that doesn't leg down and then leg up it kind of just sequentially rolls forward.
Michael Halloran: The mix impact on the business should be relatively stable.
Michael Halloran: Because that's if you look at the order rates, that's what where we're going to be shipping out of and then the growth that we're getting which will be which will be producing in Q1 will be shipped out in Q2 and Q3 I mean, that's our estimates right now.
Speaker Change: Yeah that makes sense and then just an update on the M&A side any any change to what you're seeing from a backdrop action ability.
Speaker Change: The amount of content that might be in the market at some point.
Speaker Change: Yeah lots of stuff coming.
Speaker Change: Interested to see them.
Speaker Change: What the spirits are out there and what we'd like to see a couple of transactions to get done there's quite a few in the pipe.
Speaker Change: To see at what how aggressive everybody is gonna be at valuation.
Speaker Change: But those are the ones everybody knows about we've also got a handful of very interesting priority proprietary deals.
Speaker Change: We're working on so we'll see I mean, we're very popular.
Speaker Change: And in multi industrial world because of all the cash over sitting on so we're seeing a lot.
Speaker Change:
Speaker Change: Time will tell about what multiples look like when we see a couple of transactions.
Speaker Change: Keep in mind that that cash on the balance sheet right now is not deployed in our forecast it's generating nice interest income so it doesn't.
Speaker Change: We're in a hole in our pocket so to speak.
Speaker Change: And when you think about your models just keep in mind that we're sticking to our.
Speaker Change: 50, <unk> year over year concept around interest income until we deploy that capital.
Speaker Change: And then you'll see a shift between.
Speaker Change: The interest line and the segment performance line as we we do deal flow.
Speaker Change: Thanks, guys, so purples, though it.
Speaker Change: Thanks.
Speaker Change: We'll take our next question from Julian Mitchell with Barclays. Please go ahead.
Julian Mitchell: Hi, Thanks, good morning, and Brad Thanks for all the help them if we think.
Speaker Change: Think about just the segment level I wanted to start with clean energy and fueling.
Speaker Change: It seemed like you did see some very encouraging signs exiting the year and below ground vehicle wash and as we're thinking about the 2025.
Speaker Change: <unk> you know maybe help us understand kind of how much of the business now is that clean energy components piece, which is sort of.
Speaker Change: Come together fairly recently and how does the growth there differ this year versus the more traditional parts of D. C. P F.
Speaker Change: Okay.
Speaker Change: I'm going to have to go back and look but I would think in terms of absolute profit. It is the largest contributor year over year that segment.
Speaker Change: And that's a combination of restructuring benefits.
Speaker Change: Growth mix on growth and in acquisitions that we've done in the prior period that actually calendar is at 12 months.
Speaker Change: Breaking it into pieces I think that will let.
Jack: Jack take you through it but we had.
Jack: In terms of the cryogenic component exposure.
Jack: We are significantly larger.
Jack: Than our nearest competitor.
Jack: That's helpful. Thank you and then.
Jack: Secondly on engineered products.
Speaker Change: Yes, there's been a lot of change in the business mix, there aerospace and defense.
Jack: A big one.
Jack: Waiting now within GE E P.
Jack: And maybe remind us of kind of the main exposures there because it looks like the volumes that were down in the fourth quarter, but should grow this year as a whole in G. P. Maybe kind of remind us sort of what's what's moving around in that and most of the visibility on that second half improvement.
Jack: Movement in the A&D shipments at TEP.
Jack: The comp was bad in Q4 and that drove the commentary.
Jack: Which is timing of shipments, which I think that we had some pretty big shipments in Q4 of 2023.
Having said that the business is big as it's ever been in.
In terms of its absolute size.
Jack: Because we've actually been an acquirer in there.
Speaker Change: In terms of the calendar as Asian I'd have to I'd have to go and work with Jack to see what 2000 22025 looks like.
Speaker Change: But it is posted to grow year over year.
Speaker Change: And having a positive margin mix benefit on that growth.
Speaker Change: Yes.
Speaker Change: Great. Thank you.
Speaker Change: Welcome.
Speaker Change: Our next question comes from Jeff Sprague with vertical research. Please go ahead.
Jeff Sprague: Hey, Thanks, good morning, everyone and congrats spread you admit it but we go back American standard Honeywell ally I know a lot of years Jeff.
Speaker Change: The high school.
Speaker Change: Yes.
Speaker Change: Maybe a CFO question to start just on.
Speaker Change: On kind of the interest income thanks for that color I assume rates are a little bit more favorable than sitting on cash and maybe a thought if you were thinking about.
Speaker Change: Maybe address if that's if that isn't that helpful. And then also I just wanted to clarify that guide.
Speaker Change: You're talking about is really only.
Speaker Change: <unk> for cash on hand, it doesn't look like you're giving yourself any credit for just the very solid free cash flow generation, you're expecting in 2025.
Speaker Change: Oh, no I think it's it's inclusive, but you know we have uses of that cash flow like we normally do right. So we'll have to see it is volatile in the sense of how many rate cuts will there be next year, we model it out and when I say, we're sticking to our year over year that we guided back.
Speaker Change: Or gave an insight into in the third quarter.
Speaker Change: It is all inclusive is for sure, but with capital deployment will impact that Jeff and Theres a lot of variables. So I think at this stage, you know give us a quarter or two to sort it out and see how deals actually flow through and then we'll be able to give you more insight into it.
Speaker Change: Great. Thanks, Hey.
Speaker Change: And then enrich on DIY.
Speaker Change: Just maybe a little bit more color, there right demand trends or given us a solid green pie, but will grow in low single digit.
Speaker Change: It's just sort of the fashion fabric or whatever you call that piece of the business is really still lagging and holding back the base is that what's going on maybe a little more color there.
Speaker Change: It's just de Minimis in terms of the revenue and earnings at this point. So we're not modeling in any kind of snapback in terms of performance.
Speaker Change: Credit to the management team the the margin accretion.
Speaker Change: Has even lapped that business.
Speaker Change: Declining over the last three years through improving the profitability of the call of the core marketing coating business.
Speaker Change: As I mentioned in my comments.
Speaker Change: We've got some other efficiency programs. If you will are laid in for 2025 that should help the accretion there. So let's just call it on the textile stuff Baden.
Speaker Change: The bottoming has taken place, but it's de Minimis now in terms of the earnings of the group.
Speaker Change: So the low single digit growth just reflects than what some normalization on the equipment side after a little bit.
Speaker Change: Okay.
Speaker Change: This one's got a ton of FX in it and it flops around between.
Speaker Change: Equipment and consumables so.
Speaker Change: We don't get all bent out of shape quarter to quarter. We look at this really this business really on a full year basis. It.
Speaker Change: It grows 2% to 4%.
Speaker Change: At the end of the day, so I believe.
Speaker Change: Wouldn't.
Speaker Change: Intra quarter volatility is almost meaningless.
Speaker Change: Mhm.
Speaker Change: Okay I was talking about the outlook would be good to go I'll leave it there. Thanks a lot Sir.
Speaker Change: Thank you. Our next question will come from Andrew <unk> with Bank of America. Please go ahead.
Speaker Change: Good morning.
Speaker Change: Hi.
Speaker Change: Yeah, well, we'll try and congratulate Brad on his retirement.
Speaker Change: It was a pleasure thank you.
Speaker Change: He'll, saying, we when he answers the crowded out.
Speaker Change: <unk>.
Speaker Change: Well, it's going to be here through all of that capital deployment.
Speaker Change: Oh yeah.
Speaker Change: I'm binge watching severance these days you know.
Speaker Change: [laughter]. So just 25 outlook for growth in our vehicle wash is much better than the commentary from peers and I would also say above ground is turning do you think youre gaining share or is it a real turn in the market right.
Speaker Change: Well I mean, I got to be careful with the peer commentary in vehicle wash because a lot of them own distribution and operate sites we.
Speaker Change: We don't we're purely equipment manufacturer.
Speaker Change:
Speaker Change: I think the commentary around that it's gotten better, but it's not inflected.
Speaker Change: Superbetter, but even a little bit of better on a margin point of view, it's positive I think the real.
Material inflection that we're seeing there if we take the cryogenic side and put it aside is the mix impact of a couple of things the mix impact of below ground, which has been pretty depressed for two or three years now.
Speaker Change: Which is highly margin accretive that's good.
Speaker Change: A lot of the restructuring we did last year is in this particular segment. So that's where the flow through that comes in which is good and then the cryogenic piece.
Speaker Change: We talked about at length in the end of Q3.
Speaker Change: That we are integral we're going to go through a big integration year here and expect to get the integration benefits of those that prior period acquisitions.
Speaker Change: Levered towards the second half of this year. So it's got a lot of kind of non.
Speaker Change: Revenue benefit underlying it and number one and number two mix is improving.
Speaker Change: Excellent. Thank you for expensive I'm sorry.
Speaker Change: Just a simple question of a colder do you think that business can double this year, given sort of the underlying growth in liquid cooling.
Speaker Change: Well I mean double relative to watch right biopharm relative to 'twenty four yeah, no just sorry, just fill liquid cooling part sorry.
Speaker Change: Dana.
Speaker Change: Hey, David counterparts, sorry could it yes.
Speaker Change: We'll see.
As I mentioned before it's just turned out to be such a short cycle business that we have.
Speaker Change: Got it we got a view of maybe 45 days in terms of.
Speaker Change: Of the demand cycle, so, we'll see but could it yes.
Speaker Change: It's good to have happy optimistic rich back thank you.
Scott Davis: Our next question comes from Scott Davis with <unk> Research. Please go ahead.
Scott Davis: Hey, good morning, guys.
Speaker Change: Hi, Congrats I'm sure you're going to Miss that.
Speaker Change: That slide out on Monday morning, or Sunday night, or whatever to Chicago, but.
Speaker Change: [laughter].
Speaker Change: Some frequent flyer miles are way I guess, you've probably got plenty, but.
Speaker Change: Anyways.
Speaker Change: I think you guys covered most of the terrain here, it's been a lot of minutiae too but.
Speaker Change: We back up a little bit is that is the refrigeration story, just about <unk> and 'twenty five or is it really also just about pent up demand.
Speaker Change: Uh huh.
Speaker Change: It's been a pretty long period, I think of under investment from a lot of your customers does that is that a correct assessment.
I think that's a correct assessment, but recall that we have kept.
Speaker Change: Our capacity.
In that particular segment, so it's more for us.
Speaker Change: Margin performance through productivity.
Speaker Change: Plus C O two.
Speaker Change: Okay.
Speaker Change: So we're not we're not going to chase dilutive growth on the on the retail refrigeration side. So between the C O two product offering and the specialty product offering we will take as much as we can get there on the on the case business.
Speaker Change: We'll see.
Speaker Change: They were in the early innings now about the C. O two transformation of whether you can bundle. The C. O two system with the case and what does that mean for margins I think that is something that will unfold during 2025.
Speaker Change: Okay.
Speaker Change: Fair enough and then just a small question I guess I've never asked this before but if you had to split up your capex between kind of maintenance and growth. How would you think about what kind of that base level of maintenance Capex is in the numbers.
Speaker Change: That's a good question, we used to give a little pie chart on that.
Speaker Change: I'm guessing.
Speaker Change: That it's a 40 Meg.
Speaker Change: But that does not include I T.
Speaker Change: And 60 growth and then if I had to carve out I'd have to get back to you Scott.
Speaker Change: Okay.
Speaker Change: Thank you guys best of luck this year all right.
Speaker Change: Thanks.
Speaker Change: Thank you and our last question will come from Deane Dray with RBC capital markets. Please go ahead.
Speaker Change: Thank you and good morning, everyone I get to do the last congrats to Brad.
Speaker Change: All the best.
Speaker Change: Thank you and I also go way back.
Speaker Change: We do.
Speaker Change: Hey.
Speaker Change: Maybe we just start a rich on the two bolt on deals how did those come about where do they fit what's kind of the attraction there and how much of that pipeline that youre looking at fits that category.
Speaker Change: They're both proprietary.
Speaker Change: One is going in pumps and process solutions and <unk>.
Speaker Change: Both of them are going to Oh, yeah, alright, because again they are both proprietary.
Speaker Change: One is its cryogenic, but it actually ends up in our pumps business. The other business is a product line expansion.
Speaker Change: For plastics and polymers for Marc.
Speaker Change: And that one I think we've been working on for three.
Speaker Change: Three years or so.
Speaker Change: Alright, good to hear on that and then datacenter came up a whole lot and Q&A prepared remarks in your slides. My guess is those were already written prior to the Monday Selloff and rich you've already said you're short cycle.
Speaker Change: Business, It's 45 days, so you're probably not looking any further out than that but just in terms of managing this business do you feel like there is any sea change in terms of data center Capex and you know.
Speaker Change: I know you didn't you can't size, the Tam, but is the Tam potentially getting smaller and more competition, just kind of how might the competitive dynamics have changed since Monday.
Speaker Change: Dean I don't know I mean, the fact of the matter is in terms of the total Tam where a rounding error.
Speaker Change: We think that we've got.
Speaker Change: A very good product that we have IP protected I think that we were.
Speaker Change: First in line in terms of building out the capacity and that's pretty much what's driven the volume growth that we've seen.
Speaker Change: I think we've been pretty prudent in terms of sizing the business. So we're not looking at the billions and billions of dollars in and trying to do the mathematics of Gigawatts to connectors I mean, many have tried all of failed cell.
Speaker Change: I'm not overly worried about it at the end of the day I think there's enough kind of shovels in the ground that makes us feel comfortable with our 2025 forecast.
Speaker Change: Excellent I appreciate that color. Thanks.
Speaker Change: Thanks.
Speaker Change: Thank you that concludes our question and answer period of Dover's fourth quarter and full year 2024 earnings Conference call. You May now disconnect. Your line at this time and have a wonderful day.
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