Q1 2025 Dover Corp Earnings Call

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Speaker Change: Good morning and welcome to Dover's first quarter, 2025 Earnings Conference call, speaking today are Richard J Tobin, President and Chief Executive Officer

Speaker Change: Chris Winker, Senior Vice President and Chief Financial Officer, and Jack Dickens, Vice President Investor Relations [inaudible]

Speaker Change: After the speakers remarks, there will be a question and answer period. If you would like to ask a question during this time, please start and then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key.

Speaker Change: As a reminder, ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you. I'd now like to turn the conference over to Mr. Jack Dickens. Please go ahead.

Jack Dickens: Thank you, Margo. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through May 15th, and a replay link of the webcast will be archived for 90 days. Our comments today will include forward looking statements based on current expectations.

Jack Dickens: Actual result end events could differ from those statements due to a number of risks and uncertainties which are disclosed in our SEC filings. We assume no obligation to update our forward-looking statements. With that, I will turn this call over to Rich. Thanks, Jack. Good morning, everybody. Let's go to slide three. Good morning, everybody. [inaudible]

Speaker Change: Q1 was a good quarter. Adjusted EPS was up 19% over the prior year on an excellent incremental margin conversion driven by a healthy mate from our growth platforms, prior period structural cost actions and positive price cost dynamics.

Speaker Change: Adjusted EBITDA Margin was up 240 basis points to 24% a record result for Q1

Speaker Change: with four or five segments posting over a hundred basis points of comparative margin expansion.

Importantly organic bookings are up for the 6th

Speaker Change: consecutive quarter with booked a bill north of one across all five segments resulting in a sizable portion of Q2 revenue already in backlog. Overall, we're very encouraged by the start of the year. All of our efforts on portfolio construction.

Speaker Change: New product introductions and methodical cost and productivity actions are driving meaningful improvement in segment profitability and durable long-term top line resilience.

Speaker Change: Let's go to slide five. Engineer products was down in the quarter on lower volumes in vehicle services and program timing and aerospace and defense.

Speaker Change: We intervened on the cost structure of vehicle service to support its margin performance going forward engineered products and specifically vehicle services the most exposed to tariffs of Chinese

Speaker Change: Imported sub-components in our case structural steel. We are out with pricing mitigation actions, but we'll keep it close eye on volume. The segment will be boasted as the year progresses by counterization of our aerospace and defense business.

Speaker Change: with the Divestitures of Distaco Environmental Services Group in 24, our engineered product segment now counts from 15% of our total portfolio down from 25% in the prior year.

Speaker Change: Clean Energy and Fueling was up 2% organically in the quarter led by strong shipments and clean energy components, fluid transport, and below ground retail fueling equipment. Robust order activity and below ground retail fueling signals are recovery after two years of lower volumes of welcome outcome.

Speaker Change: We are also encouraged by the increase in quoting activity in clean energy components [inaudible]

Speaker Change: particularly in recent wins in space launch and LNG infrastructure in the US and Europe .

Speaker Change: Margin Performance was robust in the quarter up 180 basis points on a higher mix of below ground feeling equipment at tight cost controls.

Speaker Change: We expect the segment to be the leaders in margin accretion in 2025 on volume leverage, pricing, and skew management and positive product mix.

Speaker Change: Imaging an ID post in another solid quarter with organic growth 4% on strong winds and serialization software and broad base growth and core marking and coding across all geographies and product lines.

Speaker Change: Margin performance was robust as managing actions on cost to serve and structural cost controls continue to drive incremental margins higher

Speaker Change: Pumps and process solutions was up 7% organically on double-digit growth and single-use biopharma components and triple-digit growth and thermal connectors.

Speaker Change: for Liquid Cooling of Data Centers. Precision components and industrial pumps also had solid results. As forecasted the long cycle polymer processing equipment was found year over year in the quarter.

Speaker Change: Segment, Revenue, Mix and Volume, Leverage, Drove, Margin Improvement on Excellent Production Performance and Volume, Growth and Biopharma and Thermal.

Speaker Change: The outlook for the rest of the year is favorable in pumps and process solutions by a farmer components and thermal connectors should continue their robust growth trajectories on secular themes and single use biological drug production and liquid cooling of data centers.

Speaker Change: Our precision components business has a healthy exposure to the gas and steam turbine markets which are performing well.

Speaker Change: Revenue was down in the quarter in climate and sustainability technologies and comparative declines of food, retail door cases and engineering services which more than offset the quarterly, record quarterly volumes and CO2 systems.

Speaker Change: We are encouraged to see year-over-year growth in our heat exchanger business for the first time since the fall of 2023. Shipments of heat exchangers for installation in European heat bumps still faced.

Speaker Change: Poor Cop and Q1, but were up sequentially from Q4. Despite the lower top line, the segment posted 120 basis points of margin improvement and year-over-year growth in absolute earnings on productivity actions and a higher mix of CO2 systems.

Speaker Change: We expect improvement of segment performance of the balance of the year on the strength of CO2 refrigeration systems.

Speaker Change: Robus Growth and Heat Exchanges for Liquid Cooling of Data Centers

Speaker Change: and a continued recovery in heat exchangers for European heat pumps on improving end-customer sentiment and normalized channel stocking levels.

Speaker Change: I'll pass it to Chris. Thanks, Rich. Good morning, everyone. Let's go to our Casual Statement on Slide 6.

Chris: This was a $3 million increase when compared to the first quarter of last year. Higher earnings and improved working capital performance were partially offset by the expected increase in capital spending on growth and productivity projects. The improved working capital performance was driven by strong collection activity, positively impacting our accounts receivable balance, partially offset by investments in inventory ahead of seasonally stronger volume quarters in Q2 and Q3. The first quarter is traditionally our lowest cash flow quarter of the year. The first quarter is traditionally our lowest cash flow quarter

Chris: Our Guidance for 2025 free cash flow remains on track at 14 to 16 percent of revenue on strong conversion of operating cash flow.

Chris: with that. Let me turn it back to Ritch. I'm on slide seven. Here we provide a little more detail in the bookings in the first quarter. Consecret of quarter of positive year over your organic bookings grow, posting a book to bill above one. As shown in the segment detail in the right, the booking rates were broad based.

Chris: with strength and our secular growth exposed markets and an encouraging trend as we move through the year. Let's go to slide eight.

and precision components, single use biopharmic components, CO2 refrigeration.

Chris: and inputs into liquid cooling applications of data centers which include our connectors as well as heat exchangers. We have made significant organic and inorganic investments behind these end markets. 75% of the acquisition capital we have deployed over the last five years.

Chris: Has been behind these markets and it remains some of our highest priority areas of investment moving forward. In aggregate these markets now account for 20% of our portfolio and drive attractive margin accretion on expected double digit growth. [inaudible]

Chris: We would deny our organic investments remain our highest priority for capital deployment. We will continue invest behind our existing businesses regardless of the near term fluctuations.

Chris: in the macro sentiment. Here we show some of the most meaningful high ROI projects for 2025. You'll see a healthy balance between growth capacity expansions, but behind some of our highest priority platforms as well as productivity and automation investments.

Chris: including some rooftop consolidations. As the rooftop consolidation projects are completed in the second half, we will provide the roll-forward benefit of the reduction of fixed costs.

Chris: Go on a slide ten, this slide delineates our current tariff, the tariff exposure, clearly this is a bit of a moving target.

Chris: and these are annualized costs based on 2024 volumes. Nevertheless, it gives you the current situation and the prevailing tariff rates. Takeaway here is that we are a proximity manufacturer, and the costs are embedded in our guidance.

Chris: I'll leave the rest of Q&A where I'm sure we'll beat this to death [inaudible]

Chris: Let's go to slide 11. We have modestly trimmed our revenue and EPS guidance ranges for the full year to reflect on certainly of the demand environment in the second half of the year because of the ongoing tariff negotiation. This is purely a top down.

Chris: Mechanical Adjustment at this point. Based on the trends in our order rates together with our backlog levels, we are in really good shape for Q2, but I think it's fair to say uncertainty in the tariff environment will have some impact on medium term demand.

As a Note

Chris: with the Euro rallying over 5% of the dollar in the past month. Due to the short-term volatility in foreign exchange, we have chosen to wait until the end of the second quarter to see where it settles.

Chris: The final note on the current environment tariffs, like any changes that occur in the macro environment, there's a tendency to focus on the negative implications. While we have spent countless hours over the past month on tariff costs,

Chris: and the supply chain implications by business and region and developing mitigation plans, one must not ignore evaluating competitive positioning.

Chris: We are a proximity manufacturer with our cost and revenue based aligns. We have manageable supply chains. We will implement solutions to offset the cost implications of tariffs.

Chris: and we will push hard for market share gains where we believe we are strategically advantaged. Be that on a cost or geographic footprint basis. The overproved during the pandemic that it can play defense and depend margins in the challenging demand environment.

Chris: We entered this year with an expect with exceptionally good momentum from a product and portfolio perspective and an advantage-bound sheet position that allows us to opportunistically play offense in capital deployment.

Chris: We will weather this tariff tumult, and I would argue that our business leaders are positioned far more on offense than defense at this at press [inaudible]

Let's go to Q&A [inaudible]

Speaker Change: Thank you. And as a reminder, ladies and gentlemen, if you would like to ask a question that is star one on your telephone keypad, if you would like to withdraw your question, please press star two. We ask that participants limit themselves to one question and one follow-up question.

Speaker Change: and would that take our first question from Jeff Sprague with Vertical Research? Please go ahead.

Speaker Change: Hey, thank you. Good morning, everyone. Yeah, Rich, let me start the dead horse beating here. Just on the on the tariff side, I wonder

Speaker Change: You know, dynamics that you're doing here, and again, how much might have been sort of in the plan now and is going towards tariffs as opposed to potentially upside that we could have had the 2025? Yeah, I think when we were in the

Speaker Change: Do it all the conferences in the quarter. It was all Mexico and Canada. Then we saw this Chinese issue with the rate. It was a little bit of a surprise, say the least.

Speaker Change: As I mentioned in the commentary where we have the exposure, we're out in the market with pricing presently. There's a little bit of a lag effect, depending on where we are from an inventory position, but yeah, we'll cover that largely with price.

Thank you. Thank you. Thank you.

Speaker Change: that a smaller proportionality of our bill of materials is subject to tariffs. In cases like that, we will take advantage of the cost position that we have vis-a-vis some of our competitors that have been importing built-up units.

Speaker Change: The, you know, if you take a look at the chart on 10

Speaker Change: I mean, other than China, that's the big number and of that big number, 60 millions on one particular product line and that product line you can see in our first quarter results. We've been a bit a little bit careful and that's why the volume's down because we wanted to get the pricing out there. [inaudible]

So, I know the question is going to come.

Speaker Change: In the Q&A here, while you're taking revenue down, if all the pricing is coming through, as I mentioned before, I mean the risk here is not price cost. I think that we've got tailwinds on

Speaker Change: on mix, and I think that we're on the front foot in terms of getting the price out there. It's really, it's volume.

Speaker Change: and it's volume in the second half, and I think that, look, I did it. It's not in our forecast and it's not built in a spreadsheet. I basically said, let's clip off about 1%, because we're probably going to have project drift because of all the delay that we've seen around these tariffs.

Speaker Change: And then just, and understood, thanks for clarifying that. And then just to kind of pick up, then, you know, as you mentioned, kind of on the conference circuit, right? Through January and February , things seem to be progressing better. It sounded like March was OK, or maybe better than OK, given the book to bills. [inaudible]

Speaker Change: But maybe just kind of talk about how you exit a decorder and did you see any sort of behavior change anywhere from your customer base, you know kind of post the April to announcements.

Speaker Change: Yeah, I mean, look, the margin, incremental margin in the quarter was phenomenal. And I guess I think I would argue we probably outperformed a little bit there because the margin mix was so healthy. Yeah, the order rates, I think, you know, like you talk to clients.

Speaker Change: Like I said before, I mean there's this view of yeah, we want to do the projects but where everybody's kind of getting nervous a little bit and there's a little bit of a drift there to say but in terms of our order rates and our shipment rates we actually accelerated through the quarter.

So...

Speaker Change: You know, like I said, that's why I'm making it, it's a sentiment adjustment I'm making, not, you know, tangible data of customers saying, yeah, I was going to probably want in Q2, but now I want in Q3, that type of thing. Our Q2, based on our backlog, should be right on what our forecasts were.

going through Q1. [inaudible]

Speaker Change: Got it. Thanks. I'll leave it there. Appreciate it. Thanks.

Andrew Obin: Our next question comes from Andrew Obin with Bank of America, please go ahead

Andrew Obin: Yeah, thanks so much. So just a question about bookings, you know, you've highlighted six consecutive quarters of your bookings growth.

Andrew Obin: but second quarter comp is tougher and I do appreciate that on a two-year stack. It's maybe tough, but you know, how should we think about just-

Andrew Obin: Sustainability of bookings growth, and I do appreciate that there may be an air pocket on bookings related to tariffs, but maybe near term. How do you see that? I would expect to be over one for Q2.

Andrew Obin: We're quoting on and stacking up there. It should be okay by the time we get to the end of Q2. But like I said, we're going to see if we can plow through negative sentiment over the next.

Speaker Change: Have left here, 65 or 8 days left in the quarter [inaudible]

Speaker Change: Gotcha. And as we think about just sort of your, just pure math on, you know, removing a percentage point of volume, but then I'll see a P.S. impact.

Speaker Change: You know, obviously the understice of execution. So it's just should we just think it as the sort of margin of safety that you've built into forecast or there's sort of signs to this 40% incremental number?

Speaker Change: There's more precise science. It was mechanical in nature, and it was basically a hundred million revenue at 38% margin or something like that. Okay, okay, exactly. Thanks so much.

Scott Davis: Our next question comes from Scott Davis with Melius Research. Please go ahead.

Scott Davis: Hey, good morning guys and welcome Chris to the call. Thanks, Ritchie, the other kind of second derivative of all this chaos is potentially M&A valuations getting a bit lower, is that?

Scott Davis: Is that something you're kind of, I mean, it's probably a little too early to say you're seeing signs of it, but is something you're anticipating?

Scott Davis: Well, we've only had one meaningful transaction in multi-world, and the valuation was pretty robust at the end of the day. I can tell you anecdotally that

Scott Davis: I'm aware of a few processes that have been pulled because of uncertainty so maybe we're going to have to wait until we get a little clarity on the tariff tumult and then we'll see

Scott Davis: When assets come back and the like, I will tell you for ourselves we're working on a bunch of stuff a lot of is proprietary so it's not in kind of like the public domain of kind of whisper stuff out there I'm

Speaker Change: Yeah, that doesn't surprise me. Hey, not to climate and minutiae here, but would you be willing to share the actual growth rate and the thermal connectors that you had in the quarter?

Speaker Change: I think that we said it was up 50 percent. I think something like that was over 100 percent. Oh excuse me, it was over 100 percent. Comparative growth, not sequentially. That would be comparative.

Speaker Change: That's a big number. All right, I'll pass it on. Thank you guys. Good luck.

Speaker Change: Thanks Thank you, next we'll go to Steve Tusa with JP Morgan, please go ahead

Andrew Obin, Michael Halloran,

Good morning. Bye.

Speaker Change: Can you opine on what your second quarter internal plan roughly looks like? No.

Okay, it's embedded and it's embedded in our full your guidance.

Okay, does it look like it's around consensus? Yes.

Yeah.

Okay.

Speaker Change: and then just on your kind of tariff mitigation, everybody's kind of giving a little bit of color on the split of what they're planning to do. I mean, should we think about it as...

Speaker Change: First of all, how much of a hit will it be in the near term and then I assume you're going to kind of work through it in the third and the fourth quarter and then how much of that is price and how much is kind of these mitigation activities. Thank you.

Speaker Change: Okay, well, look, clearly, if we set us, if we put all the regions into the manageable category with the exception of Chinese imports,

Speaker Change: Just if you look at the quantum on the slide, that we can bake up a variety of different ways whether it's productivity or price or hopefully both.

Speaker Change: On the China one, we will make up largely in price, but I will tell you that we are aggressively negotiating with our suppliers in China about what the split is.

So a couple things.

Speaker Change: I get that the percentage tariff rate right now is extremely high. I don't believe that that is going to last for the balance of the year. So this is just math number one.

Speaker Change: What little bit of supply base that we have in China left and our vendors and ourselves, and I can tell you that anecdotally at worst we'll share it.

Speaker Change: kind of rounding air in the end. How did you, what is your macro assumption to a degree? I mean, like, why not 20 cents? Why not 30 cents? Like

Speaker Change: What is your... I'm just trying to get a gauge of how well you can manage in the context of a downside economic scenario. What are you actually thinking from a top downer? Was it just like, hey, you know what? Ten cents, let's just strip it out.

Speaker Change: Yeah, it was mechanical at the end of the day and like I said in the commentary, you know, what I could have done I could have given you a bridge and then rerun FX and said, you know, damn the torpedoes were holding guidance for the year. I don't know what the derivative of the demand environment is going to be in the second half.

Speaker Change: So I basically, and it so it wasn't like we ran Q3 and Q4CAS into these types of scenarios, I just basically clipped it right off the top. Now, do I have...

Speaker Change: A variety of different measures baked in there, sure. Is all the pricing that we've assumed, the incremental pricing, is that assumed in our forecast right now? No, right, so does the extent.

Speaker Change: that it sticks and volume remains where we think it's going to be, that's upside, or a beat to FX thing to death. I'll tell you that Q1...

Speaker Change: Corporate costs were high, and we don't expect that to repeat over the balance of the year, so there's a variety of different items that we have. What I can say is, I think, what we've proven in the past is in a downside scenario.

Flex our cost-based relatively quickly. [inaudible]

Speaker Change: Got it. I don't want to ask about the torpedo reference, but thanks a lot.

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

Speaker Change: were up overall around a point, and the full year is guided at the midpoint up three. So I understand you've sort of lowered the original assumption for organic sales growth for the year.

Speaker Change: but it's still an acceleration versus the first quarters. Maybe sort of help us understand which businesses your most confident in will see that step up in gross please. Well Julian as you know go back and look at the seasonality of our.

Speaker Change: Portfolio, we tend to be relatively low growth and build inventory in Q1 and then step it up in Q2 and Q3, and then Q4 is always a little bit depending on what our view is about.

Speaker Change: The following year, whether we run production performance, you've heard that speech before. So seasonality says that we should jump in Q2.

Speaker Change: Like I said, Q2 from a backlog perspective, we can see it.

Speaker Change: So, unless we start getting cancellations around here, I think that we're confident in terms of what the step-up is in Q2.

Speaker Change: We'll watch order rates going through Q2, would you give us clarity?

Speaker Change: on the top line for Q3, but it's a little bit early to tell. I don't even think we have even anecdotal data yet.

Speaker Change: as we're in Q2 right now, but I'm not hearing anybody squealing that their order rates are falling off a cliff so...

Speaker Change: We feel really good about Q2 because of the backlog so that would support what our assumptions were for Q2 so basically what I did was trim off the back end of here just because of we need to get some visibility.

Speaker Change: That's helpful. Thank you. And then just the second question on the operating margins and the tariffs. So just to understand it is the main assumption that the net

Speaker Change: Dollar tariff effect for the full year is around zero and just if that's a firm wide number

Speaker Change: Is there any aspect whereby you may be a negative in a given quarter and any color on which segment you think might have the biggest tariff risk?

Speaker Change: How do I want to respond to that? Okay, I understand what you're saying, right? If we were net neutral for pricing and tariff costs, it's diluted I don't know what you're going to do.

Speaker Change: But that has an underlying assumption of first of all, if you look at those numbers and you back out that the Chinese number is a full year number, we've already got a quarter under a belt that didn't exist and we don't expect it to last for the balance of the year.

Speaker Change: What are we talking about here at the end of the day in terms of if that was the scenario to me that gets eaten up in mix?

Speaker Change: in Margin is going to be on intracigment mix far more on price cost because of tariff.

That's great. Thank you.

Speaker Change: Next, we're going to take our question from Michael Halloran with Beard. Please go ahead.

Michael Halloran: Hey, morning, everyone. So can you just give any top process on if you see any difference between your op-ex, study, state, consumable type businesses, and a versus more your CapEx, longer cycle type pieces in terms of orders or commentary from customers at this point?

Speaker Change: Yeah, I mean the capex ones are the ones we're keeping a close eye on, right? So the volume...

Speaker Change: Churn, maybe that's not the right word on kind of the flow businesses, we just watch that on a daily basis, and then we just take a look at it, the ones that we really got to keep a look on is...

Speaker Change: Our customers' capex projects that we are a precursor or a component supplier into it.

Speaker Change: and that's where the concern is. Is everybody just going to keep going along?

Speaker Change: Are we going to run into a situation of, you know, I'm worried about the macro and I want to see some clarity and the things get delayed a little bit so that's the part that we're working on the most and that's really the reason that we gave a little bit of air cut to the total volume for the year because if you get...

Speaker Change: You know, another month or so of drift, you're not going to be able to make it up in the balance of the year. So clearly...

Speaker Change: Right now, the flow portion of the business is going well, but we'll keep an eye on it. It's the one that we really got to pay attention to is customer catbacks where we're a supplier into it.

Speaker Change: and the implication there is that you're seeing a little bit of drift from the CapEx piece or you're just worried that the drift will come [inaudible]

I'm worried [inaudible]

Right.

Speaker Change: I can't see it in the ordinance, right? So we just have anecdotal conversations with all of our business leaders that are talking to these customers and all the customers to say and not on everything's on path, everything's on path, but experience says when you get into a situation like this.

Speaker Change: Could you get some drift? Sure, right? Is it going to be meaningful over the long term? It's irrelevant at the end of the day, but we're just trying to be perfect.

Speaker Change: Yep, nope, makes sense. And then just some of the inventory side of things. How would you characterize your inventory and then your content in the channel? How would you call a character at inventory level?

Speaker Change: I think we did a great job, but inventory, we actually have more inventory than we would like, but I think we were on the front foot of breaking in a bunch of inventory.

Speaker Change: issues around tariffs or buying forward because metal pricing was quite good for us in Q4, so...

Speaker Change: One exception on the structural steel around vehicle services group which we will take our time because it may be prudent to wait to see if we get a tariff settlement.

Speaker Change: and then just catch up on the volume in the back end of the year. That's the only one I can think of where we're being careful around tariffs as a relates to inventory.

Makes sense. I really appreciate it. Thanks. Thanks

Speaker Change: We'll take our next question from Nigel Coe with Wolf Research. Please go ahead.

Thank you. Good morning.

Speaker Change: So again, in the spirit of Sweden, the small stuff here. If we look at the top line guide at the point cut to the top line, if we decompose that between price and volume, is there like a two point cut to volumes and maybe a point higher price to offset the tariffs?

Speaker Change: And then if we then take that thought a little bit further, would that mean maybe a three to four point cut to the volumes in the back half of the year? Just trying to judge how conservative the opposition in the back half of the year? Like I said, it's a mechanical adjustment. It's not a spreadsheet where...

Speaker Change: We basically said let's see all the price increases and then you know then on static volume it is more or less let's just take 1% off at current conversion margin and be done with it.

Speaker Change: I can't predict a mix and from a portfolio of this diverse over the next recorders and split in between price and volume. If volume...

Speaker Change: Stays at what we thought it was going to be going into the year and we get price

Right, then clearly that's some upside but-

Speaker Change: Getting all this price, is that going to have a detriment on volume? And who knows at this point?

Speaker Change: Right, so I think that we need to get through another quarter here and maybe get some clarity of where we are on this tariff tumult and then we can start breaking this down into individual cells on the spreadsheet, but it's inclination rather than some [inaudible]

Speaker Change: Mathematical Adjustment. Okay, no, that's very clear, thanks Ritchie. And then just a couple of quick ones, PPS margins, obviously, were great, normally 1Q with the low point.

Speaker Change: I've realised it mixes in the issue but would you expect one cue to be the low point for PPS? And then did we detect a glimmer of hope in European heat pumps just as any of those things?

Speaker Change: Yeah, it's a glimmer of hope. So sequentially up, if you remember, our orders were up in Q4 on heat pumps. I mean, albeit off a pretty low base. So European heat pumps has outperformed our internal forecast for the last two quarters. So...

Speaker Change: Ray Speed 8 Exchanges goes into variety, different applications, but yes, we were seeing orders which is good news because that means that the inventory in the system has been largely depleted at this point.

Speaker Change: What was the first question? The PPS Martin. Oh, PPS margins. I think you're going to be careful with that because...

Speaker Change: Mark was down because it had a bad comp, so as Mark and DPC come up

Speaker Change: They're great margin businesses, but they're deludive to that. So I think it'd be a little careful about whether that thing keeps going up. I hope it does, but you do have a mix effect on the balance of the portfolio. So you have to be careful. Okay. Thank you, George. Yep.

Speaker Change: Next, we'll go to Joe O'Day with Wells Fargo, please go ahead [inaudible]

Joe O'Day: Hi, good morning. Can you just expand on the proximity manufacturer considerations here, where in the business you would have some of the bigger advantages, any positions where you would be yourself as being a little bit disadvantaged?

Joe O'Day: He's not, without giving out a lot of proprietary information about our view of the competitive

that

Joe O'Day: We have competitors that import fully built up units of product that compete with us.

Joe O'Day: where we manufacture in the United States, maybe have subcomponents that are imported, but as a percentage of the bill of materials it's significantly lower. So...

We're on the lookout

Joe O'Day: to take advantage of that and that will all be around.

Joe O'Day: Pricing, right? Because everybody's going to go out a bunch of pricing and the signaling and then you're going to max it then you're going to start doing the calculations between market share gains and price cost and a variety of things like that so.

Joe O'Day: We do that work every year around here. So when things like this happened or when it happened back in 2020, we have different strategies by business relative to the cost basis of their competitors.

Joe O'Day: And then on vehicle lift, just to expand on that dynamic a little bit, to try to understand how much is your managing the timing of demand for moves in the manufacturing base.

Joe O'Day: versus underlying cat-bex demand trends where there's a little bit of a pause. It doesn't sound like you're seeing much pause. [inaudible]

Joe O'Day: in the businesses, but if you remember how you're managing the timing. Yeah, if you remember how this old tariff thing lifted off, it was all around auto and all around NAFTA and autos, the one that

for The Brunt of it. Um.

Joe O'Day: Number one, and number two, we had big discussions.

Joe O'Day: It seems like a long time ago is probably like 16 days ago about the consumer and inflation on the consumer and this is a particular product that unlike the vast majority of our portfolio that has got auto and consumer exposure. So you would expect the reaction there to be the quickest.

Joe O'Day: and we've seen that in terms of volume. And coupled on that, now we've got, it happens to be the one business that we have that's...

Joe O'Day: We've got a higher exposure in terms of imported components, particularly from China, so some of that is market and some of that is self-inflicted from a timing point of view. We put a bunch of pricing out there.

Joe O'Day: and we'll see what happens in terms of demand or end price cost going forward.

Shut it. Thank you.

Yep.

Operator: We'll take our next question from Joe Ritchie with Goldman Sachs. Please go ahead.

Hey, good morning guys.

Percent Range for the Year.

No.

I don't think so.

Okay, okay, but within the range [inaudible]

Yeah!

Okay.

Operator: and then I wanted to just ask the question, I know we don't usually spend a lot of time on DII, but I think I heard you say that you expected to be the greatest margin expansion story from the segment perspective this year. Just talk us through some of these structural cost actions that are occurring in the business and maybe what the ballpark expectations are from more than this year. Let me answer this.

Operator: The DII question, that's not where we expect the largest part to be expansion. That would be in clean energy and fueling where we expect the largest absolute margin expansion from a year on rear point of view. Now DII on the other hand.

Operator: If you go back and look historically in terms of the margin, I'm doing this out of my head but it almost seems like it's about 100 to 125 basis points of margin expansion.

Operator: per year, over the last five years, if you strip out in kind of COVID year where it's all over the place. So not to take away anything from the management team of DII, which has done a fantastic job in terms of their cost to serve on relatively. [inaudible]

Operator: You know, single lower single digit volume growth that the absolute profit or cash flow generated by that business has been exemplary.

Operator: on the clean energy side. That's where we've done the restructuring in the prior year. So you've got the roll forward.

Operator: What we tried to signal here on that slide about our CAPEX projects we told you that we're doing a bunch of acquisitions

Operator: and that we were going to begin intervening on the footprint in 2025. We're ready to get that all kicked off and as we kick it off largely in the back half of the year we'll give you the

So, it's a combination of-

Operator: The volume that we're getting, we get a really healthy mix as opposed to the previous year in that segment and not roll forward restructuring benefit this year and another set of roll forward coming for next year.

We're going to get that business to 25% EBITDA margin.

God, it's super humble. Thanks for the clarification.

Thanks

Speaker Change: Our next question comes from Andy Kaplowitz with City Group, please go ahead

Hey, good morning, everyone.

Hi.

Speaker Change: Richard, he's falling up on DPS. He mentioned a tough comp at Mug in Q1 and

Speaker Change: Thompson Process, they'll put up 7% revenue grills, and over 30% margin, so I think...

Speaker Change: Given mild comps, get easier now in key two. Does pumps and process potentially continue to excel right here? And I think you said in the recent past that by a farm, I was trending up higher than your routines forecast for 25. I think today you talked about thermal connectors of triple digits. I was going to continue to run hotter for the rest of the year you think.

Speaker Change: Uh, not at the race that it's going out. I mean, we're kind of in the lift-off phase. It's it's gonna

We're...

Really, really, [inaudible]

Speaker Change: and the gain on share of those particular product lines in the two sides but I don't think let's not overlay something that's not realistic in terms of an acceleration from here.

Speaker Change: Tell Paul, maybe just looking a little more closely at DCS because I think in the recent past you've mentioned you expect your crowd-related businesses not having to grow double digits.

Speaker Change: What do you see now? I know you're you know you're forecasting mid single digit for the year last quarter you started at two percent That's obviously not bad, but is there anything holding that business down?

Speaker Change: That's got a flow portion of the business and then it's got a project related portion of the business.

The Flow Report of the Business

Speaker Change: is doing well when we talk about the cryogenic component side of it, and then you've got project side, right? And the project side...

Speaker Change: We did terrifically, which drove the margin in Q1. We didn't expect that to kind of go through, but we have to be a little bit cautious on the project side because that goes into, that's customer capex at the end of the day and we're trying to get some clarity of where we go from there. Let's get started.

Speaker Change: The margin mix of where the demand's coming from and the structural cost takeout makes us feel pretty good no matter what the back half dynamic is in that particular place.

Appreciate the color.

Yep.

Speaker Change: And our last question comes from Brett Linzey with Mizzouho, please go ahead.

Brett Lindsey: Hey, good morning, thanks. Just want to come back to price, so the incremental price not fully baked in the guy, but I guess in terms of what you've announced to the channel and customers, do you have all the price out there that you need to mitigate the terrace for this year?

Brett Lindsey: I hope so, if we could get some clarity on what the tariffs are actually going to be for the year.

Brett Lindsey: We just put out pricing last night. I got an email so I think the vast majority of it it's out there, but it's a little bit of a moving target under the current circumstances.

Brett Lindsey: And then price is always signaling at the end of the day, and there's a lag time in price, so it's not as if we raise prices tonight. We've got to burn the backlog off and you know the drill. So I think everything that we know about is out there. [inaudible]

We'll see about realization.

Speaker Change: Yep, makes sense. And then maybe just shifting back to FX, so headwind flipping to a tailwind here, and understandably there's the gyrations you don't want to mark the market. But I guess if you were to strike the line today...

Speaker Change: How are you thinking about the net impact with all the hedges and everything in terms of the tailwind?

at today's race.

I think the last time we ran it.

Speaker Change: For what we trimmed out of the guidance, we'd put it right back on FX.

Yep.

Speaker Change: Believe it or not. All right, got it. Yes, thanks a lot. Thanks

Speaker Change: Thank you, and that concludes our question, answer period and Dover's first quarter 2025 earnings conference call. You may disconnect your line at this time and have a wonderful day.

Nope, nope, nope.