Q2 2025 Dover Earnings Call

July 24, 2025

Blitzer, Kris Wenker, senior Vice President and Chief Financial Officer.

Inject Dickens: Inject Dickens Vice President Investor Relations after.

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Inject Dickens: Thank you.

Speaker Change: I would like to now turn the call over to Mr. Jack Dickens. Please go ahead.

Jack Dickens: Thank you Stephanie and good morning, everyone and thank you for joining our call.

Jack Dickens: Oreo version of this call will be available on our website through August 14th and a replay link of the webcast will be archived for 90 days.

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 this call over to rich.

Speaker Change: Thanks, Jack let's get started on slide three.

Rich: Second quarter results were strong driven by excellent production performance positive margin mix from our growth platforms and carryforward cost actions taken in prior periods topline performance accelerated in the quarter on broad based shipment growth in short cycle components and outperformance of our secular growth exposed end markets.

Rich: Order trends continued to be positive momentum in the quarter up 7% year over year bolstering our confidence in the second half outlook with the majority of our third quarter revenue already in backlog as an anecdote.

Rich: July.

Rich: Orders are tracking really well going into the back end of the third quarter.

Rich: Margin performance in the quarter was exemplary with a record adjusted segment EBITDA margins above 25, as a result of prior peer.

Rich: Period portfolio actions positive mix from the growth platforms, and our rigorous cost containment and productivity actions adjusted EPS was up 16% in the quarter.

Rich: Our solid operational results were complemented by ongoing capital deployment actions, we continue to invest in high ROI organic capital projects.

Rich: Including productivity and capacity expansion as well as targeted footprint optimization.

Rich: During the quarter. We also completed two acquisitions of attractive fast growing assets within our high priority pumps and process solutions segment, our balance sheet strength remains an advantage that provides flexibility as we pursue value creating capital deployment to further expand our businesses in high growth high margin areas.

Rich: We are approaching the second half of the year constructively, despite some macro and macroeconomic noise underlying end market demand is healthy and is supported by our sustained order rates as a result, we are <unk>.

Rich: We're raising our full year adjusted EPS guidance to $9 35 to $9 55.

Rich: Which is plus 14% for the full year at midpoint.

Rich: Let's go to slide five engineered products revenue was down in the quarter on lower volumes of vehicle services, we did see improving sentiment in vehicle services as the quarter progressed.

Rich: Most notably in North America, where book to Bill was North of one margin performance of the segment was up on structural cost management.

Rich: And productivity.

Rich: Clean energy and feeling was up 8% in the quarter led by strong shipments in clean energy components for fluid transport and North American retail fueling software and equipment margin performance was solid in the corner up 80 basis points on volume leverage higher mix of below ground fueling equipment and restructuring.

As a result, we are raising our full year adjusted EPS guidance to $9 35 to $9 55.

Benefit carryforward.

Rich: Imaging and I'd was stable on growth in our core marking and coding business, partially offset with timing of textiles margin performance remains exemplary in this segment at 28% adjusted EBIT margin management actions on cost to serve and structural cost controls continue to drive incremental margins higher.

Okay.

Plus 14% for the full year at midpoint.

Let's go to slide five engineered products revenue was down in the quarter on lower volumes of vehicle services, we did see improving sentiment and vehicle services as the quarter progressed, most notably in North America, where book to Bill was north of one margin performance for this segment was up on structural cost management.

Rich: Pumps and process solution was up 4% organically on double digit growth in single use biopharma components thermal connectors for liquid cooling of data centers and digital controls of midstream natural gas compression.

And productivity.

Clean energy and feeling was up 8% in the quarter led by strong shipments in clean energy components for fluid transport and North American retail fueling software and equipment margin performance was solid in the corner up 80 basis points on volume leverage higher mix of below ground feeling equipment and restructuring Ben.

Industrial pumps posted solid results as well and Thats forecasted a long cycled polymer processing equipment business was down year over year, the quoting activity improved in the quarter and book to Bill was ahead of one.

Rich: Segment revenue performance, including the acquisition of <unk> and volume leverage drove margin improvement an excellent production performance with volume and secular growth.

Carryforward.

Imaging, an idea was stable on growth in our core marking and coding business, partially offset it was timing of textiles margin performance remains exemplary in this segment at 28% adjusted EBIT margin management actions on cost to serve and structural cost controls.

Rich: Exposed end markets revenue was down in the quarter and climate sustainability on a comparative declines in food retail cases, and engineering services, which more than offset the record quarterly volumes and <unk> systems heat exchangers was up sequentially and year over year on record.

To drive incremental margins higher pumps.

Pumps and process solution was up 4% organically and double digit growth in single use biopharma components thermal connectors for liquid cooling of data centers and digital controls of midstream natural gas compression.

Rich: Quarterly shipments in North America, where we are actively increasing capacity to accommodate growing demand tied to liquid cooling of data centers.

Rich: Shipments of heat exchangers for installation in European heat market heat pumps was down slightly in the quarter, but are expected to inflect positively second half of the year.

Industrial pumps posted solid results as well and that's forecasted a long cycled polymer processing equipment business was down year over year, the quoting activity improved in the quarter and book to Bill was ahead of one.

Speaker Change: Despite the lower top line in the segment posted 60 basis points of margin improvement against the difficult comp period on productivity actions and a higher mix of Seo to systems I'll pass it onto Chris here. Thanks.

Segment revenue performance, including the acquisition of <unk> and volume leverage drove margin improvement an excellent production performance with volume and secular growth.

Chris: Thanks, Rich good morning, everyone. Let's go to our cash flow statement on slide six year to date free cash flow was $261 million or 7% of revenue up $41 million over the prior year as year over year improvements in operating cash conversion more than offset expected increases in capital spend on growth and productivity projects.

Exposed end markets revenue was down in the quarter and climate sustainability on a comparative declines in food retail cases, and engineering services, which more than offset the record quarterly volumes in C. O. Two systems heat exchangers was up sequentially and year over year on record.

Chris: We expect cash flow generation to accelerate in the second half of the year in line with historical trends as seasonal working capital liquidation in the third and fourth quarters should more than offset continued investments in productivity capacity expansion and cost structure optimization projects, which are expected to generate meaningful benefits into 2026 and beyond.

Accordingly shipments in North America, where we are actively increasing capacity to accommodate growing demand tied to liquid cooling of data centers.

Shipments of heat exchangers for installation in European heat market heat pumps was down slightly in the quarter, but are expected to inflect positively for the second half of the year.

Chris: Our guidance for 2025 free cash flow remains on track at 14% to 16% of revenue on strong conversion of operating cash flow with that let me turn it back to rich.

Despite the lower top line the segment close to 60 basis points of margin improvement against the difficult comp period on productivity actions and a higher mix of C. O two systems I'll pass it onto Chris here.

Chris: Okay, Let me try as I might on bookings gives us one of the world here.

Chris: Here, we provide more detail than usual so I guess the reaction is murky.

Chris: Rich good morning, everyone. Let's go to our cash flow statement on slide six year to date free cash flow was $261 million or 7% of revenue up $41 million over the prior year as year over year improvements in operating cash conversion more than offset expected increases in capital spend on growth and productivity projects.

Chris: In the second quarter Q2, consolidated bookings were up 7% over the prior year. They were also up sequentially.

Chris: Our continued momentum across our business year to date book to Bill was above one across all five segments with particular strength in our highest margin and secular growth markets, an encouraging sign as we move into the second half.

Chris: We expect cash flow generation to accelerate in the second half of the year in line with historical trends as seasonal working capital liquidation of third and fourth quarters should more than offset continued investments in productivity and capacity expansion and cost structure optimization projects, which are expected to generate meaningful benefits into 2026 and beyond.

Chris: Let's go to slide eight.

Chris: Slide eight which highlights several of the end markets that are driving our consolidated growth forecast and our margin.

Chris: And market data and our customer forecasts and our own booking rates. We are encouraged by the outlook and the broader industrial gas complex with cleaner energy components and precision.

Speaker Change: Our guidance for 2025 free cash flow remains on track at 14% to 16% of revenue on strong conversion of operating cash flow with that let me turn it back to rich.

Speaker Change: Okay, Let me try as I might on bookings gives us one of the world here.

Chris: Clean energy components.

Chris: Single use biopharma components, Seo to refrigeration systems and inputs into liquid cooling applications of data centers, which includes our large heat exchanger business.

Speaker Change: Here, we provide more detail than usual so I guess the reaction is murky.

Speaker Change: In the second quarter Q2, consolidated bookings were up 7% over the prior year. They were also up sequentially.

Chris: We have made significant organic and inorganic investments behind these markets and they remain one of our highest priority areas for investment going forward for to talk about in a minute and.

Speaker Change: Marking a continued momentum across our business year to date book to Bill is above one across all five segments with particular strength in our highest margin and secular growth markets, an encouraging sign as we move into the second half.

Chris: In aggregate these markets now account for 20% of our portfolio and drive attractive margin accretion and.

Chris: And expected double digit growth, which I think we're on track as of the close of Q2.

Speaker Change: Let's go to slide eight.

Speaker Change: Slide eight which highlights several of the end markets that are driving our consolidated growth forecast and our margin continuing end market data and our customer forecasts and our own booking rates. We are encouraged by the outlook and the broader industrial gas complex with cleaner energy components and precision.

Chris: Let's go to nine are <unk> investments remain our highest priority of capital deployment.

Chris: Moving forward and in fact, accelerating a number of organic investments.

Chris: Despite the near term uncertainty in the macro.

Chris: Sentiment.

Chris: Here, we show some of our most meaningful.

Speaker Change: Got it clean energy components single use Biopharma components C O two refrigeration systems and inputs into liquid cooling applications and data centers, which includes our large heat exchanger business.

Chris: And high ROI capital projects.

Chris: And we are undertaking in 2025, youll see a healthy balance between growth capacity expansions behind some of our highest priority platforms as well as productivity and automation investments, including rooftop consolidations.

Speaker Change: We have made significant organic and inorganic investments behind these markets and they remain one of our highest priority areas for investment going forward are to talk about in a minute.

Chris: So we put in the press release that we were tallying up these savings will provide an update in our next quarterly call as to the absolute quantum of the savings roll forward benefit into 2026, suffice to say that given the scale of the projects. We expect the savings to be meaningful. This is in line with our goal each year.

Speaker Change: Aggregate these markets now account for 20% of our portfolio and drive attractive margin accretion.

Speaker Change: And expected double digit growth, which I think we're on track as of the close of Q2.

Speaker Change: Let's go to nine Orange, Uganda can dresses remain our highest priority of capital deployment we are.

Chris: To drive non revenue profit generation through fixed cost reduction program. So.

Speaker Change: Moving forward and in fact, accelerating a number of organic investment.

Chris: We're kind of midstream, let's deal with the footprint projects at the re shoring.

Speaker Change: Despite the near term uncertainty in the macro.

Speaker Change: Sentiment.

Speaker Change: Here, we show some of our most meaningful.

And high ROI capital projects.

Chris: We're in good shape in terms of the timing.

Speaker Change: And we are undertaking in 2025, you'll see a healthy balance between growth capacity expansions.

Chris: As Chris mentioned that is going to be reflected in our cash flow or our capex projections for the year. So the timing of it and some of these projects are quite complex.

Speaker Change: And some of our highest priority platforms, as well as productivity and automation investments, including rooftop consolidations.

Chris: When we talked about going from.

Speaker Change: So we've put in the press release that we were tallying up these savings will provide an update in our next quarterly call as to the absolute quantum of the savings roll forward benefit into 2026, suffice to say that given the scale of the projects. We expect the savings to be meaningful and this is in line with our goal each year.

Chris: Eliminating six rooftops for example by the time, we get to Q3 will have an idea of the timing of the roll forward of these benefits that are not.

Chris: Will we catch a bit of it in Q4 may be but the vast majority of it will.

Chris: <unk>.

Chris: Non revenue profit of these restructuring so what youre going to see between now and the end of the year is the Capex inflect up and the restructuring charges come as we start to take down some.

Speaker Change: To drive non revenue profit generation through fixed cost reduction program. So.

Speaker Change: We're kind of midstream, let's deal with the footprint projects and the re shoring.

Chris: Some of these operations what was the total roll forward. This year, but 30 about $30 million 30 30 million of savings are reflected in this year's accounts in.

Speaker Change:

Speaker Change: We're in good shape in terms of the timing.

Speaker Change: As Chris mentioned.

Chris: That is going to be reflected in our cash flow or our capex projections for the year. So the timing of it and some of these projects are quite complex.

Chris: And that's why you see.

Chris: With that at least year to date not a lot of revenue growth I think we've got easier comps in the second half of the year, but.

Speaker Change: When we talked about going from.

Chris: You see the margin accretion and meaningful contributor to some of those margins as last year's roll forward.

Speaker Change: Eliminating six rooftops for example by the time, we get to Q3 will have an idea of the timing of the roll forward of these benefits that are not you know.

Chris: We would expect that next year would be.

The same if not better the biggest the biggest single project that we have is one of the roof top ones.

Speaker Change: Will we catch a bit of it in Q4, maybe but the vast majority of it will.

Speaker Change: <unk> <unk>.

Chris: Catch that in the latter half of next year, but.

Speaker Change: Non revenue profit of these restructuring so what you're going to see between now and the end of the year is the capex inflect up and the restructuring charges come as we start to take down.

Chris: And now let's go to sleep.

Chris: Okay.

Chris: When we take a look.

Chris: At what we've taken every year in terms of margin expansion I mean, if it's close to 100 basis points a year a good portion of that is revenue mix a variety of things that we're doing the portfolio, but a meaningful portion of that.

Speaker Change: Some of these operations what was the total roll forward this year, but 30 by $30 million 30 mid $30 million of savings are reflected in this year's accounts and it did and that's why you see.

Chris: Is let's call it productivity.

Speaker Change: With that at least year to date not a lot of revenue growth I think we've got easier comps in the second half of the year, but you, but you see the margin accretion and meaningful contributor to some of those margins as last year's roll forward.

Chris: Our business model.

Continues at its current trajectory of improving the portfolio.

Chris: Grading the mix within the individual segments, we also look and put goals on the businesses.

Speaker Change: I would expect that next year would be the same if not better. The biggest thing is the biggest single project that we have is one of the roof top ones.

Chris: Meaningful productivity of which a lot of it is.

Chris: Things like rooftop consolidation and the reduction of fixed costs. So.

Chris: Can't give it to you now because I don't want to give you a number that's incorrect, but we think that at minimum the benefit in 2006 is going to be the same.

Speaker Change: Probably catch that in the latter half of next year, but.

Speaker Change: Now, let's go to slide.

Speaker Change: Okay.

Chris: Excuse me at a minimum that we're seeing in 25 of them will be 26.

Speaker Change: When we take a look at.

Chris: But the total quantum is going to be larger.

Speaker Change: What we've taken every year in terms of margin expansion I mean, if it's close to 100 basis points a year a good portion of that is revenue mix a variety of things that we're doing the portfolio, but a meaningful portion of that is let's call it productivity.

Chris: And the pipe is just a question of do we realize it in 'twenty six 'twenty seven okay.

Chris: Now I got myself off the script sure thats offsetting to everybody.

Chris: I'll take slide 11.

Chris: The bottom line is if you look at the margin accretion here.

Speaker Change: Our business model.

Speaker Change: Continues at its current trajectory of improving the portfolio.

Chris: Graded mix I'm talking about 25 productivity all the things I just talked about.

Speaker Change: Top grading the mix within the individual segments, we also look and put goals on the businesses.

Chris: There is the look for the back half of the year. So we're not calling for.

Speaker Change: Meaningful productivity of which a lot of it is.

Chris: Any margin dilution.

Chris: But you can see in terms of what our organic growth rate as the year the back half largely because of the acceleration on our growth platforms and easier comps that we had in the back half of last year and Thats why you see the organic growth.

Speaker Change: Things like rooftop consolidation and the reduction of fixed costs. So.

Speaker Change: Can't give it to you now because I don't want to give you a number that's incorrect, but we think that at minimum benefit in 'twenty six is going to be the same.

Chris: Estimates for the last year.

Speaker Change: Excuse me at a minimum that we're seeing in 25 of them will be 26.

Chris: We'll go to Q&A in a second whether theres anything more meaningful Oh I'm sure.

Speaker Change: But the total quantum is going to be larger that's what's in the pipe. It's just a question of do we realize it in 2026 or 27, okay.

Chris: Okay.

Chris: What do we used for the back half for dollar or dollar euro and the back half we have a range of outcomes, but one of them was carrying forward current rates right. So looking back tested the volatility in the first half of the year and then use that for the second half of the year I find it I can't predict FX so you've.

Speaker Change: I got myself off the script sure that's upsetting to everybody.

Speaker Change: Slide 11.

Speaker Change: The bottom line is if you look at the margin accretion here.

Speaker Change: Upgraded mix I'm talking about 25 productivity all of the things I just talked about.

Chris: Prevailing spot rates with a hold back of the year based on the volatility that we saw at the beginning of their I think is.

Speaker Change: Theres the look for the back half of the year, So we're not calling for.

Chris: A bit ambitious and if FX rates at least dollar euro stays the same then that's good for translation and maybe gives US a 100 basis points of increased revenue in the back half of.

Speaker Change: Any margin dilution.

Speaker Change: But you can see in terms of what our organic growth rate as the year the back half largely because of the acceleration on our growth platforms and easier comps that we had in the back half of last year. That's why you see the organic growth.

Chris: So I'm sure we can beat that to death in the Q&A. So why don't we go to Q&A.

Chris: Jack.

Speaker Change: Thank you if you'd like to ask a question simply press Star and then the number one on your telephone keypad.

Speaker Change: Estimates for the last year.

Speaker Change: We'll go to Q&A in a second whether theres anything more meaningful there Oh I'm sure.

Speaker Change: If you would like to withdraw your question. Please press star to you we ask the participants limit themselves to one question and one follow up question.

Speaker Change: What do we use for the back half for dollar or dollar euro and the back half we have a range of outcomes, but one of them was carrying forward current rates right. So looking back tested the volatility in the first half of the year and then use that for the second half of the year are you find it I can't predict.

Mike Halloran: Our first question will come from Mike Halloran with Baird.

Mike Halloran: Hey, good morning, everyone.

Speaker Change: Good morning, Good morning, Hey, a couple of clarifying questions first talk about pretty happy with the trajectory through the quarter.

Speaker Change: FX, so using prevailing spot rates at a hold back of the year based on the volatility that we saw at the beginning of their I think is.

Mike Halloran: Yeah.

Mike Halloran: Tough organic order comps, but could you just give us a sense for how you thought things played out sequentially through the quarter relative to previous expectations and.

Speaker Change: A bit ambitious and yes.

Speaker Change: FX rates at least dollar euro stays the same then that's good for translation and maybe gives US a 100 basis points and increased revenue in the back half.

Mike Halloran: Scream, how things have changed from your perspective going into the back half of the year versus not.

Mike Halloran: It seems like you're at or above the trajectory you would've been talking about entering the year with the original guide.

Speaker Change: I'm sure we can beat that to death in the Q&A. So why don't we go to Q&A.

Mike Halloran: Just had to deal with some volatility in the middle but any context, there would be great.

Speaker Change: Jack.

Jack: Thank you if you'd like to ask a question simply press Star and then the number one on your telephone keypad.

Mike Halloran: I'd like generally speaking with all of the noise around tariffs and price cost and everything else clearly.

Jack: If you would like to withdraw your question. Please press star to you we ask the participants limit themselves to one question and one follow up question.

Mike Halloran: The margin performance through the first half of the year is slightly above expectation now having said that in our beginning to lap comps on biopharma and everything else. So that's a big contributor to the mixed benefit I think the only portion of the portfolio.

Speaker Change: Our first question will come from Mike Halloran with Baird.

Mike Halloran: Hey, good morning, everyone.

Speaker Change: Alright, good morning, Hey, a couple a couple of clarifying questions first talk about pretty happy with the trajectory through the quarter.

You know it.

Speaker Change: Organic order comps, but could you just give us a sense for how you thought things played out sequentially through the quarter relative to previous expectations and.

Mike Halloran: That is a little lighter in terms of volume would be on cryogenic components, because it seems to be.

Speaker Change: Scream of how things have changed from your perspective going into the back half of the year versus not.

Mike Halloran: A lot of notional backlog based on talking to our customer and thats kind of sliding to the right and I think we commented that.

Speaker Change: It seems like you're at or above the trajectory you would've been talking about entering the year with the original guide.

Mike Halloran: At the beginning there and I think the traditional refrigeration case business is behind and Thats, a pretty big business. So.

Speaker Change: Just had to deal with some volatility in the middle but any context, there would be great.

Speaker Change: I feel like generally speaking with all the noise around tariffs and price cost and everything else clearly.

Mike Halloran: That is.

Mike Halloran: I would have thought that revenue performance, there would've been a little bit better, but because of margin mix across the portfolio.

Speaker Change: You know the margin performance through the first half of the year is slightly above expectation now having said that you know.

Mike Halloran: Anecdotally that business is not dilutive to our margins in anymore, but it's.

Speaker Change: We're beginning to lap comps on Biopharma and everything else. So that's a big contributor to the mixed benefit I think the only portion of the portfolio.

Mike Halloran: It's two for one a little bit between the precision components.

Mike Halloran: And the data center business. So overall I mean I think.

Mike Halloran: Our expectation in core refrigeration is clearly now going to be behind what we thought at the beginning of the year.

Speaker Change: That is a little lighter in terms of volume would be.

Speaker Change: Cryogenic components, because it seems to be.

Mike Halloran: But because of the growth platforms are so accretive to our margins.

Speaker Change: A lot of notional backlog based on talking to our customer thats kind of sliding to the right and I think to be commented that.

Mike Halloran: About 100 basis points, there is 200 basis points on refrigeration so.

Speaker Change: So if any are there and I think the traditional refrigeration case business is behind and that's a pretty big business. So.

Mike Halloran: Optically on book to Bill, it's $20 million I think that's the difference for the quarter between I guess I should have stopped the last shipment of the month somewhere because then we would have been at one that we won't be hammering that issue.

Speaker Change:

Speaker Change: That is we would have thought that revenue performance, there would've been a little bit better, but because of margin mix across the portfolio.

Mike Halloran: Year over year on H one.

Speaker Change:

Speaker Change: Anecdotally that business is not dilutive to our margins in any more but it's a.

Mike Halloran: On a sequential.

Mike Halloran: <unk> up overall on book to Bill and as I said, we went and pulled everybody because we haven't closed July yet, but nobody.

Speaker Change: It's two for one a little bit between the precision components.

Mike Halloran: Said that the momentum on bookings was.

Speaker Change: And the data center business. So overall I mean I think.

Mike Halloran: Poor so we're starting off Q3 on a bookings basis it looks good.

Speaker Change: Our expectation in core refrigeration is clearly now going to be behind what we thought at the beginning of the year.

Mike Halloran: Yes.

Mike Halloran: Maybe you could bridge the first half to the second half.

Speaker Change: But because of the growth platforms are so accretive to our margins.

Mike Halloran: Alright.

Mike Halloran: And the guidance and maybe the better way to put it well I mean, we're ahead of where ahead.

Speaker Change: <unk>.

Speaker Change: It's about 100 basis points, there is 200 basis points on refrigeration. So.

Mike Halloran: Yes, we're ahead.

Mike Halloran: On where we thought we would be.

Speaker Change: Optically on book to Bill, it's $20 million I think that's the difference for the quarter between I guess I should have stopped the last shipment of the month somewhere because then we would have been at one that we won't be hammering that issue.

Mike Halloran: So all we're doing is roll forward rolling forward, where we're kind of head into the back half now.

Mike Halloran: Question is when we deal with this every year.

Mike Halloran: At the end of Q3, we will look where we are on bookings momentum and then we're going to make.

Speaker Change: Year over year on H, one kind of on a sequential but are still up overall on book to Bill and as I said, we went and pulled everybody because we haven't closed July yet, but nobody.

Mike Halloran: We're going to decide what we're going to do in Q4 of weather cut production performance and maximize cash flow for the year, but.

Mike Halloran: But we won't that make that decision until probably mid this quarter based on bookings momentum and backlog.

Speaker Change: <unk> said that the momentum on bookings was.

Speaker Change: Poor so we're starting off Q3 on a bookings basis it looks good.

Mike Halloran: If I put it in the context of what's changed though you took away the cautionary language from last one around the growth yet.

Speaker Change: Yeah.

Speaker Change: Maybe you could bridge the first half to the second half or sorry, what's changed in the guidance is maybe the better way to put it well I mean, we're ahead.

Mike Halloran: Maybe a little movement on the FX I don't really want to play.

Mike Halloran: One person, but bottom line, yes bottom line is no real change to the momentum you've been talking about other than the.

Speaker Change: Yeah, I mean, we're ahead right on where we thought we would be.

Mike Halloran: Cautionary language.

Speaker Change: Right. So all we're doing is roll forward rolling forward, where we're kind of head into the back half now. The question is when we deal with this every year, we do deal with at the end of Q3, we will look where we are on bookings momentum and then we're going to make.

Mike Halloran: Yes, I mean look I mean, we're <unk>.

Mike Halloran: At midpoint is 14%.

Mike Halloran: We're aiming towards the top of the range, which is 16% year over year, which will put us in time in terms of top quartile.

Speaker Change: We're going to decide what we're going to do in Q4 of weather.

Mike Halloran: Our comments.

Mike Halloran: Yes.

Mike Halloran: Thank you.

Mike Halloran: Yeah.

Speaker Change: Production performance and maximize cash flow for the year.

Speaker Change: Thank you we'll take our next question from Chris Snyder with Morgan Stanley.

Speaker Change: But we won't that make that decision until probably mid this quarter based on bookings momentum and backlog.

Speaker Change: Thank you I wanted to ask about competitive dynamics in the market you guys have a lot of.

Chris Snyder: North America production you guys compete against a lot of smaller competitors are there any verticals, where you are starting to see share shifts or maybe it's still too early for that.

Speaker Change: If I put it in the context of what's changed though it's you took away the cautionary language from last one was around the growth you had you had some maybe a little movement on the FX I don't I don't really want to one person, but bottom line. Yeah bottom line is no real change to the momentum you would've been talking about other than.

Chris Snyder: And is there any change youre seeing in the price environment.

Chris Snyder: Post the escalation thank you.

Chris Snyder: Yeah.

Speaker Change: Moving to the cautionary language.

Chris Snyder: Okay.

Chris Snyder: Well I mean.

Speaker Change: Yeah, I mean look I mean, we're EPS at midpoint is 14%.

Chris Snyder: Clearly on price total cost Luna positive position so.

Speaker Change: We're aiming towards the top of the range, which is 16% year over year, which will put us in time in terms of top quartile.

Chris Snyder: So we would expect.

Chris Snyder: We don't see any.

Chris Snyder: Particular headwinds coming.

Speaker Change: Our Congress.

Chris Snyder: Either way and we are pretty much out with our total pricing.

Speaker Change: Yes, that's helpful.

Speaker Change: Thank you.

Speaker Change: Yeah.

Chris Snyder: That we're putting out so we expect some accretion in terms of the margin Thats something unknown Pops up in terms of price cost.

Speaker Change: Thank you we'll take our next question from Chris Snyder with Morgan Stanley.

Speaker Change: Thank you I wanted to ask about competitive dynamics in the market you guys have a lot of north.

Speaker Change: Yes, I mean, our business model is competing with smaller competitors and.

Speaker Change: North America production you guys compete against a lot of smaller competitors are there any verticals, where you're starting to see share shifts or maybe it's still too early for that and is there any change you're seeing in the price environment.

Chris Snyder: That allows us ability to.

Chris Snyder: Either extract pricing or managing put costs, probably more effectively.

Chris Snyder: Can't say yet about share.

Chris Snyder: Sure.

Chris Snyder: <unk>.

Speaker Change: Host the escalation thank you.

Chris Snyder: Because we won.

Chris Snyder: Because the dynamic of the restock at the beginning of the Q.

Speaker Change: Yeah.

Speaker Change: Okay.

Chris Snyder: Q1 had a lot of kind of restocking there and now you are just basically booking and shipping based on current conditions with demand.

Speaker Change: I mean.

Speaker Change: Clearly on price total cost were in a positive position.

Speaker Change: So we would expect.

Chris Snyder: Thank you.

Speaker Change: We don't see any.

Speaker Change: I appreciate that and then maybe just a follow up on some of the prior questions around the back half. So theres a lot of moving parts here with price FX or acquisitions.

Speaker Change: Particular headwinds coming.

Speaker Change: Either way and we are pretty much out with our total pricing.

Speaker Change: That we're putting out so we expect some accretion in terms of the margin that's something.

Speaker Change: Can you just kind of maybe level set what the guide calls for and volumes in the back half of the year and how that compares to where volumes have been tracking down in the first half. Thank you.

Speaker Change: Unknown Pops up in terms of price cost.

Speaker Change: Yeah.

Speaker Change: No dramatic change so.

Speaker Change: Our business model is competing with smaller competitors and.

Speaker Change: We've made up kind of some headwinds I've mentioned refrigeration.

Speaker Change: That allows us the ability to.

Speaker Change: Either extract pricing or managing put costs, probably more effectively.

Speaker Change: I mean, some headwinds in terms of demand.

Speaker Change: And vehicle services and at least in the first half.

Speaker Change: Can't say, yet about sure sure.

Speaker Change: There is amount of rotation.

Speaker Change:

Speaker Change: Because we won.

Speaker Change: Because I think that.

Speaker Change: Because the dynamic of the restock at the beginning of the.

Speaker Change: Q1 in Biopharma was probably is that was that was a little bit of restocking.

Speaker Change: Q1 had a lot of kind of restocking there and now Youre, just basically booking and shipping based on current conditions and demand.

Speaker Change: Just because you can see from some of the market participants that are calling for kind of.

Thank you.

Speaker Change: There was a restocking in terms of in terms of Q1 and now it's pretty the growth rate. There is probably going to come down in the second half of the year at least in terms of comps because biopharma and to a lesser extent.

Speaker Change: I appreciate that and then maybe just a follow up on some of the prior questions around the back half. So theres a lot of moving parts here with price FX and acquisitions.

Speaker Change: Could you just kind of maybe level set what.

Speaker Change: What the guide calls for and volumes in the back half of the year and kind of how that compares to where volumes have been tracking out in the first half. Thank you.

Speaker Change: Thermal connectors have E had begun to grow so.

Speaker Change: So the relative outperformance will kind of flatten out in the second half of the year.

Speaker Change: There is no dramatic change so.

Speaker Change: And then some of the some of the businesses that have not been as strong in the first half will start to come back at the modestly dilutive to consolidated margins, but not dramatically.

Speaker Change: We've made up kind of some headwinds I've mentioned refrigeration.

Speaker Change: I mean, there's some headwinds in terms of demand.

Speaker Change: And vehicle services at least in the first half.

Speaker Change: There is amount of rotation.

Speaker Change: Thank you.

Speaker Change: Because I think that.

Speaker Change: Q1 in Biopharma was probably if that wasn't that was a little bit of restocking.

Speaker Change: Thank you. Our next question will come from Steve Tusa with JP Morgan.

Steve Tusa: Hey, good morning.

Speaker Change: Just because you can see from some of the market participants calling for kind of.

Speaker Change: Hi.

Speaker Change: Yes.

Speaker Change: So I just wanted to dig into the margins.

Speaker Change: Little more.

Speaker Change: In the second half here.

Speaker Change: Obviously youre coming from a pretty good base I think you had said on the last call or maybe in the follow up with Jack that the total segment incremental would be below just below 40%.

Speaker Change: Thermo connectors have E had begun to grow so the relative outperformance of kind of flattened out in the second half of the year.

Speaker Change: Because of these tariff dynamics.

Speaker Change: I think where you are today kind of the jumping off point of the <unk>.

Speaker Change: Suggest something a little better than that maybe just just some rough guidance around what you would expect for total segment Incrementals This year for 25.

And then some of the some of the businesses that have not been as strong in the first half we will start to come back that's modestly dilutive to consolidated margins, but not dramatically.

Speaker Change: Yes, sure I mean, there is.

Speaker Change: There is there is.

Speaker Change: Total Incrementals and then Theres five business Incrementals and I think as I just said.

Speaker Change: Thank you.

Speaker Change: Because of the relative growth rates between H, one and H to your Incrementals are going to come down because of our lower margin businesses as opposed to we got off to a really good start in Dps. For example, so that's going to just flattened out relatively based on the contribution of relative contributions so those revenues.

Steve Tusa: Thank you. Our next question will come from Steve Tusa with JP Morgan.

Speaker Change: Yeah.

Steve Tusa: Hey, good morning.

Speaker Change: Hi.

So I just wanted to dig into the margins a little more.

Speaker Change: In the second half here.

Speaker Change: But as you can see.

Speaker Change: So it's mix at the end of the day when you look at Slide 11, we are calling for everything to be.

Speaker Change: Because of these tariff dynamics.

Speaker Change: But the but the incremental in aggregate is going to come down that's.

Speaker Change: I think where you are today kind of the jumping off point of the <unk>.

Speaker Change: Kind of what we're looking at.

Speaker Change: Suggest something a little better than that maybe just just some rough guidance around what you would expect for total segment Incrementals This year for 25.

Speaker Change: And look.

Speaker Change: No I mean, we're a.

Speaker Change: Bit of a short portfolio as more short cycle now.

Speaker Change: Then it was in the past just because of the contribution of the longer cycle businesses in because really there is no lack of capacity in the market for most of the products that we have so lead times and visibility going forward on the portfolio is a little more difficult. So almost kind of guessing every 90 days.

Speaker Change: Yeah sure I mean, there's there's theirs.

Speaker Change: Total Incrementals and then Theres five business Incrementals and I think as I just said.

Speaker Change: Because of the relative growth rates between H, one and H two your incrementals are going to come down because they are lower margin businesses as opposed to we got off to a really good start in Dps. For example, so that's kind of just flattened out relatively based on the contribution of relative contributions so those revenues but.

Speaker Change: <unk>.

Speaker Change: Our cycle is going to go we're not going to try to manage the total the total EBITDA margin of the portfolio.

Speaker Change: We do it at the business level on contribution margin when we don't try to do it at the total so could it be better.

Speaker Change: As you can see.

Speaker Change: So it's mix at the end of the day you know when you look at slide 11, we're calling for everything to be.

Speaker Change: But I think the caution it based on the forecast that we have today.

Speaker Change: But the but the incremental in aggregate is going to come down that's.

Speaker Change: The relative contribution it's more mix related than <unk>.

Speaker Change: <unk>, our input or anything else all of that is covered in our full year EPS right. It just seems to me, though that year I think youre trending like 23 point to $22 six something in that range first half your second half just kind of seasonally should be should be better than that as my guess on the second well.

Speaker Change: Kind of what we're looking at.

Speaker Change: And look.

Speaker Change: No. That's I mean, we're a bit of a short portfolio as more short cycle now.

Speaker Change: Then it was in the past just because of the contribution of the longer cycle businesses and because really there is no lack of capacity in the market for most of the products that we have so lead times and visibility going forward on the portfolio is a little more difficult. So almost kind of guessing every 90 days.

Speaker Change: But you need what you need to understand that I hope, it's not the case, but if we look and we think that we can catch up on our backlog in Q1, we will dial down it will flush as much inventory as we can and keep that production performance for 2026, Okay. And then just just one just one last question youre going to be exiting I think you'd like.

Speaker Change: Of our cycle is going to go we're not going to try to manage the towards the total EBITDA margin of the portfolio.

Speaker Change: We do it at the business level on contribution margin when we don't try to do it at the total so could it be better.

Speaker Change: Above 5% mid single digit type of organic growth rate in the fourth quarter.

Speaker Change: You've talked about the cost savings you've got a little acquisition tailwind I mean should we think about next year kind of EPS algo being.

Speaker Change: But I think the caution of based on the forecast that we have today.

Speaker Change: Relative contribution, it's more mix related than pricing or input or anything else. All of that is covered in the full year EPS.

Speaker Change: Pretty similar to this year.

Speaker Change: Maybe a little bit that I got.

Speaker Change: I got to say, what the margin performance and I don't see any reason for that to come down.

Speaker Change: It just seems to me, though that year I think youre trending like 23 points to $22 six something in that range first half your second half just kind of seasonally should be should be better than that is my guess on the second well.

Speaker Change: A full year of this incremental margin plus a bigger cost savings target roll forward were.

Speaker Change: Very excited about.

Speaker Change: About what the incremental margin on revenue is going to track two in 2026.

Speaker Change: Well.

Speaker Change: But do you need what you need to understand and I hope, it's not the case, but if we look and we think that we can catch up on our backlog in Q1, we will dial down it will flush as much inventory as we can and keep that production performance for 2026, Okay. And then just just one just one last question youre going to be exiting I think I'd like.

Speaker Change: Got it.

Speaker Change: That's not murky that's crystal clear thank you.

Speaker Change: Yes.

Speaker Change: Yeah Piyush.

Speaker Change: Alright next.

Speaker Change: Thank you. Our next question comes from Nigel Coe with Wolfe Research.

Nigel Coe: Thanks, Good morning, guys.

Speaker Change: Above a 5% mid single digit type of organic growth rate in the fourth quarter, you've talked about the cost savings you got a little acquisition tailwind I mean should we think about next year kind of EPS algo being.

Speaker Change: Hi.

Speaker Change: Price.

Speaker Change: Pricing, obviously really good and it sounds like it sounds like price is pretty much no surcharge rollback et cetera, I think the one business that is lagging behind us.

Speaker Change: Yeah.

Speaker Change: Probably because demand is quite weak there, but I'm just wondering if there's scope for pricing at CFT to improve through the year.

Speaker Change: Pretty similar to this year.

Speaker Change: So I got to say, what the margin performance and I don't see any reason for that to come down.

Speaker Change: Hum polymers apart here.

Speaker Change: A full year of this incremental margin plus a bigger cost savings target roll forward, we're very excited about.

Speaker Change: Yes.

Speaker Change: Mark.

Speaker Change: About what the incremental margin on revenue is going to track two in 2026.

Speaker Change: Yes, I mean the.

Speaker Change: CSP.

Speaker Change: Got it.

Speaker Change: Is more absorption.

Speaker Change: It's not murky that's crystal clear thank you.

Speaker Change: Right now because the core.

Speaker Change: Yes.

Speaker Change: [laughter] Touche Alright next.

Speaker Change: Our core business is 20.

Speaker Change: Core businesses <unk> and that is with a lack of belt back in I think we're just going to have to wait for pelvic volumes come back in and we're not even modeling that in at all for the balance of the year.

Nigel Coe: Thank you. Our next question comes from Nigel Coe with Wolfe Research.

Nigel Coe: Thanks, Good morning, guys.

Nigel Coe: So if the right.

Nigel Coe: Pricing, obviously really good and it sounds like it sounds like prices pretty much sat here no surcharge rollback et cetera, I think the one business that is lagging behind is our CST.

Speaker Change: And you were coming off a very big margin on heat exchangers during the day.

Speaker Change: Tore a days of heat pumps in Europe.

Nigel Coe: Probably because demand is quite weak there, but I'm just wondering if there's scope for pricing at CST to improve through the year.

Speaker Change: That is slowly coming up as that market comes that's a 25% EBITDA margin business.

Speaker Change: Let me say how did you guys pull this apart here.

Speaker Change: It's not there today right so as it ramps back up.

Nigel Coe: Okay.

Speaker Change: And it's going to ramp back up for two reasons that heat pumps are coming back, but they are way below where they were at the peak but.

Nigel Coe: Mark.

Nigel Coe: Yeah, I mean the.

Speaker Change: But we don't have a ton of dilution there because the data center portion of that business, which is accretive as a product line. There comes back so we.

Nigel Coe: Yeah.

Nigel Coe: C S T.

Nigel Coe: Is more absorption.

Nigel Coe: Right now because the core <unk>.

Speaker Change: We believe right now.

Nigel Coe: Our business is 20.

Speaker Change: Making that margin considering the headwinds we had to peak and the fact that we brought back.

Nigel Coe: Core business is <unk> and that is with a lack of bell I can I think we're just going to have to wait for <unk> volumes come back in and we're not even modeling that in at all for the balance of the year.

Speaker Change: The traditional case business at the volume that we thought we were going to have this year, which I mentioned before that a slow that's 20% EBITA margin. So it's just all mix right now we've got plenty of room to move it up.

Speaker Change: And you were coming off a very big margin on heat exchangers during the.

Nigel Coe: Tore a days of heat pumps in Europe.

Speaker Change: It's also.

Speaker Change: Obviously, we've talked about we've done a lot of structural cost work, we've got a good tailwind for our mix on our <unk> two product line. So we see we're also seeing part some positive trends there as well all of them, but its single biggest productivity project that we have on that slide nine is in that segment.

Nigel Coe: That is slowly coming up as that market comes that that's a 25% EBITDA margin business.

Nigel Coe: It's not there today right so as it ramps back up.

Nigel Coe: And it's going to ramp back up for two reasons that the heat pumps are coming back, but they are way below where they were at the peak.

Speaker Change: Okay, Yeah, but the question is more about pricing I think I think price was prior Brian.

Nigel Coe: We don't have a ton of dilution there because the data center portion of that business, which is accretive as a product line there comes back so.

Speaker Change: At the margin.

Speaker Change: Okay. Okay.

Then a quick one just going.

Nigel Coe: We believe right now.

Speaker Change: Going back to <unk>.

Speaker Change: <unk> pharma.

Nigel Coe: Making that margin considering the headwinds we had to peak and the fact that we brought back.

Speaker Change: You talked about the first half second half with the restocking et cetera.

Speaker Change: There has been a bit of noise in some of the biopharma more in life Sciences in Biopharma.

Nigel Coe: The traditional case business at the volume that we thought we were going to have this year, which I mentioned before that is slow that's 20% EBITDA margin. So it's just all mix right now we've got plenty of room to move it up.

Speaker Change: Just wondering have you seen any project pushes et cetera.

Speaker Change: Because we all had a bit of noise in those markets.

Speaker Change: Yes, it's really hard for us I mean, we look at the same people that you look at their customers of ours remember that ours is more weighted towards end use product than it is for new builds.

Nigel Coe: It's also.

Nigel Coe: We've talked about we've done a lot of structural cost work, we've got a good tailwind from mix on our <unk> product line. So we see we're also seeing part some positive trends there as well all the single biggest productivity projects that we have on that slide nine is in that segment.

Speaker Change: As long as the machines that have been delivered are out there and they're running it is consuming our product.

Speaker Change: It's not on marginal build of new product.

Nigel Coe: Okay, Yeah, but the question is more about pricing I think I think price was prior Brian.

Speaker Change: Okay, great great. Thanks rich.

Nigel Coe: It's all at the margin.

Speaker Change: Thanks.

Speaker Change: Yes.

Speaker Change: Thank you, we'll move next to Andrew <unk> with Bank of America.

Nigel Coe: Okay. Okay.

Nigel Coe: And then a quick one just.

Andrew: Yes, good morning.

Nigel Coe: Going back to <unk>.

Nigel Coe: Biopharma.

Speaker Change: Yeah.

Speaker Change: So the question is.

Nigel Coe: You talked about the first half second half with the restocking etc.

Speaker Change: Can you talk about any tariff uncertainty impact on orders in the quarter as best as you can tell and what I'm trying to get to is that was there any pull forward or do you, mainly see delays and push outs.

Nigel Coe: There hasn't been a bit of noise in some of the Biopharma Lifesciences and Biopharma.

Speaker Change: Wondering have you seen any project pushes et cetera.

Nigel Coe: Because we all had a bit of noise in those markets.

Speaker Change: More of the push outs.

Speaker Change: Yeah, it's really hard for us I mean, we look at the same people that you look at their customers of ours remember that ours is more weighted towards end use product.

Speaker Change: And is there a specific vertical or yes, I mean, it's on refrigeration. Another non cotwo portion of refrigeration has been lighter of projects that we had scheduled.

Nigel Coe: It is for new builds.

Speaker Change: Based on.

Speaker Change: Customer discussion.

As long as the machines that have been delivered are out there and they are running it's consuming our product.

Speaker Change: Slid to the right and which is not.

Speaker Change: Yeah.

Speaker Change: It's the retail which is the consumer portion of the market companies have.

Nigel Coe: It's not on marginal build of new product.

Speaker Change: Okay, great great. Thanks rich.

Speaker Change: More pressure at the end of the day, so to see it in in retail food is not surprising overall.

Nigel Coe: <unk>.

Nigel Coe: Yes.

Speaker Change: Thank you, we'll move next to Andrew <unk> with Bank of America.

Andrew: Yes, good morning.

Speaker Change: Yes, we look at it yes.

Nigel Coe: Hi.

Nigel Coe: So the question is can.

Speaker Change: And we look at it as a kind of a proxy.

Nigel Coe: Can you talk about any tariff uncertainty impact on orders in the quarter as best as you can tell them what I'm trying to get to is that was there any pull forward or do you, mainly see delays and push outs.

Speaker Change: Shipping <unk> systems at a robust rate.

Speaker Change: Need cases, when you do those system. So it's just a lag effect.

Speaker Change: And then just a follow up on the push out did you also on cryogenic LNG, that's being pushed out.

Nigel Coe: More of the push outs.

Nigel Coe: And is there a specific vertical or yes, I mean, its in refrigeration. Another non <unk> portion of refrigeration has been lighter.

Speaker Change: Yeah, mostly.

Speaker Change: The whole the whole system.

Speaker Change: <unk>.

Speaker Change: The infrastructure build is taking a little bit longer than we would've thought and we're kind of some of the last things that go in there.

Nigel Coe: Projects that we had scheduled.

Nigel Coe: Based on.

Nigel Coe: Customer discussion.

Speaker Change: Including transport.

Nigel Coe: Slid to the right and which is not.

Speaker Change: It's still good it's just not as robust as.

Nigel Coe: Yeah.

Nigel Coe: I think it's the retail part of the consumer portion of the market companies have.

Speaker Change: Customer communications would lead to.

Speaker Change: Well, let me ask a question about our business, where they are probably a little bit more growth.

Nigel Coe: More pressure at the end of the day, so to see it in in retail food is not surprising overall.

Speaker Change: What were bookings for datacenter exposed businesses on specifically.

Speaker Change: Thermal connectors and swap.

Nigel Coe: Yeah, when we look at it yes.

Speaker Change: You are adding capacity in both.

Nigel Coe: And we look at it as a kind of a proxy.

Speaker Change: Yes, Eric.

Speaker Change: Are you a believer in the data center build out.

Nigel Coe: Shipping C O two systems at a robust rate you need cases, when you do those systems. So it's just a lag effect.

Speaker Change: Yeah.

Speaker Change: Our small portion of the billions of dollars going into it yes.

Nigel Coe: And then just a follow up on the push out and did you also on the cryogenic LNG that's being pushed out.

Speaker Change: What's our growth rate on thermal connect us year to date.

Speaker Change: 50 50.

Speaker Change: <unk> and.

Speaker Change: In swap.

Speaker Change: Yeah, mostly.

Speaker Change: Well I'm sure the percentage a very high but it's small.

Nigel Coe: The whole the whole system.

Nigel Coe: It's the.

Nigel Coe: The infrastructure build is taking a little bit longer than we would've thought and we're kind of some of the last things that go in there.

Speaker Change: Okay.

Speaker Change: All our starting point right.

Speaker Change: Alright, thanks, so much.

Speaker Change: Thank you we'll take our next question from Jeff Sprague with vertical research partners.

Nigel Coe: Including transport.

Nigel Coe: So it's still good it's just not as robust as.

Jeff Sprague: Hey, good morning, everyone.

Speaker Change: Hey, Rich one place where you did confuse me and maybe I haven't had enough coffee. This morning, but just on the on the restructuring just to be clear, so you're saying the wrap around the actions from last year's work.

Nigel Coe: Customer communications would lead to.

Speaker Change: Well, let me ask you a question about our business, where they are probably a little bit more growth.

Nigel Coe: What were bookings for datacenter exposed businesses on specifically.

Speaker Change: Thermo connectors and swap.

Speaker Change: Is the $30 million benefit this year.

Speaker Change: Adding capacity in both so fair to say, you're a believer in the data center build out.

Speaker Change: A point on the stuff that you're working on this year you see at least $30 million next year is that that's correct yes.

Speaker Change: Yeah, I mean for our small portion of the billions of dollars going into it yes.

Speaker Change: Sure I think the number is going to be bigger we just want to get the timing of how much is captured in 2006 and what the full roll forward isn't a 27 right. So youll be able to then youll see it because you'll see it in our capex number and you'll see it in our cash flow when we do the restructuring.

Speaker Change: I mean, what's our growth rate on thermal connect us year to date.

Speaker Change: <unk> 50.

Speaker Change: <unk> and.

Speaker Change: In swap.

Speaker Change: Well I'm sure the percentage a very high but it's small.

Speaker Change: Okay.

Speaker Change: Smaller starting point right.

Speaker Change: Alright, thanks, so much.

Speaker Change: And what is the sort of the uncertainty in your mind and kind of tallying up the current actions. Obviously you would have undertaken those with a return expectation is there some really big variability in how.

Speaker Change: Thanks.

Speaker Change: Thank you we'll take our next question from Jeff Sprague with vertical research partners.

Jeff Sprague: Hey, good morning, everyone.

Speaker Change: These projects really manifest or the fruit that they bear.

Speaker Change: Yes.

Speaker Change: The footprint ones.

Speaker Change: Our difficult I mean, these are building new factories at the end of the day. So we're very careful about the timing it's not the return the return is going to be material. It's just how much do we get in 2006, and then you can't treat all of it as restructuring so because you have to run redundant capacity.

Speaker Change: $30 million benefit this year.

Speaker Change: And at this point on the stuff that Youre working on this year, you'll see at least $30 million next year is that that's correct yes.

Speaker Change: For I think the number is going to be bigger we just wanted to get the timing of how much is captured in 2006 and what the full roll forward isn't twenty-seven right. So youll be able to then youll see it because you'll see it in our Capex number and Youll see it in our cash flow when we do the restructuring.

Speaker Change: So theres actually a negative cost as youre completing these things, but in terms of where we're tracking on the projects themselves were all I guess, we're more in front of them we are behind.

Speaker Change: And that's why I think that.

Speaker Change: We tipped up capex forecast for the year is to accommodate that.

Speaker Change: So the das should settle on all of that as we exit 2006, and we should see sort of full run rate in 2007, and thats the number youre going to provide for us on the third quarter.

Speaker Change: Yeah.

Speaker Change: Im going to give your best estimate right.

Speaker Change: The footprint ones are difficult I mean, these are building new factories at the end of the day. So we're very careful about the timing it's not the return the return is going to be material. It's just how much do we get in 'twenty six.

Speaker Change: This coming quarter, and then with the when the timing is.

Speaker Change: Okay, Great and then.

Speaker Change: I'll just pick the mid on the FX just one more time so unclear.

Speaker Change: Your prior revenue forecast of two the four assumed no FX I believe right in the for the six now has one point of FX and it is that correct.

Speaker Change: And then you can't treat all of it as restructuring so because you have to run redundant capacity. So there is actually a negative cost as youre completing these things, but in terms of where we're tracking on the projects themselves were all up.

Speaker Change: Yeah, Yeah, that's correct, but the way to look at it and it's written down somewhere.

Speaker Change: We're basically taking average.

Speaker Change: I guess, we're more in front of them we are behind.

Speaker Change: FX year to date and using that number for the second half.

Speaker Change: And that's why I think that.

Speaker Change: We tipped up capex forecast for the year is to accommodate that.

Speaker Change: Yes, okay.

Speaker Change: Alright, Thanks, a lot I'll leave it there appreciate it.

Speaker Change: So the das should settle on all of that as we exit 'twenty six and we should see sort of full run rate in 2007, and thats the number youre going to provide for us on the third quarter.

Speaker Change: Thanks.

Speaker Change: Thank you, we'll move next to Deane dray with RBC capital markets.

Speaker Change: Thank you and good morning, everyone.

Speaker Change: Hi.

Speaker Change: Okay.

Speaker Change: I'm going to give you the best estimate right.

Speaker Change: Just wanted to circle back on this high growth opportunity in data center can you size for us what it is today combine between the thermal connectors and heat exchangers.

Speaker Change: This coming quarter, and then with the when the timing is.

Speaker Change: Okay, Great and then.

Speaker Change: I'll just pick the mid on the FX just one more time so unclear. So your prior revenue forecast of two of the four assumed no FX I believe right in the for the six now has one point of FX and it is that correct.

Speaker Change: Percent of revenues and would you ever set up a dedicated team to go after this opportunity.

Speaker Change: Industry estimates that there's nine years of backlog. It just seems like are you doing enough to capture your share of wallet.

Speaker Change: Yeah, Yeah, that's correct, but the way to look at it and it's written down somewhere.

Speaker Change: We're basically taking average.

Speaker Change: Im not going to monetize it for you Dean, but I can tell you that we are the leaders in the connectors and probably co leader in the heat exchangers for the market size.

Speaker Change: <unk> year to date and using that number for the second half.

Speaker Change: Mhm Yep Okay.

Speaker Change: Alright, Thanks, a lot I'll leave it there appreciate it yeah.

Speaker Change: Thanks.

Speaker Change: Thank you, we'll move next to Deane dray with RBC capital markets.

Speaker Change: We've built out capacity and are building out capacity to accommodate what the projected volumes are.

Deane Dray: Thank you and good morning, everyone.

Speaker Change: Hi.

Speaker Change: Okay.

Speaker Change: Just wanted to circle back on this high growth opportunity in data center can you size for us what it is today combined between the thermal connectors and heat exchangers.

Speaker Change: So I don't expect from a market share point of view.

Speaker Change: That we're going to not be able to compete I just think that we've got to be careful with this we saw all those announcements about EV battery plants that.

Speaker Change: The percent of revenues and would you ever set up like a dedicated team to go after this opportunity.

Speaker Change: Turned out to be a lot lower than I am in no position.

Speaker Change: To say so we have dedicated teams for both those product lines. So we're known well.

Speaker Change: Industry estimates that there's nine years of backlog. It just seems like are you doing enough to capture your share of wallet.

Speaker Change: It's just very difficult to believe what the.

Speaker Change: The size of the capacity that's going to go in I hope, it's higher right, but we are in front we are overcapacity.

Deane Dray: I'm not going to monetize it for you Dean, but I can tell you that we are the leaders in the connectors and probably co leader in the heat exchangers for the market size.

Speaker Change: And both those products.

Speaker Change: That's really helpful. And then if we start thinking about pump margins going forward.

Speaker Change:

Speaker Change: We've built out capacity in our <unk>.

Speaker Change: How much.

Speaker Change: I'll call. It project selectivity are you avoiding some lower margin business and just being able to get a mix up in terms of the types of.

Speaker Change: And are building out capacity to accommodate what the projected volumes are.

Speaker Change: So I don't expect from a market share point of view.

Speaker Change: That we're going to not be able to compete I just think that we've got to be careful with this we saw all those announcements about EV battery plants that.

Speaker Change: Platforms that youre targeting.

Speaker Change: Yes, I mean, if you go back to slide 10, that's part and parcel to kind of the business model. What we've gotten out of you can see what we've gotten out of inside those individuals' segment, but we've exited.

Speaker Change: Turned out to be a lot lower than I am in no position.

Speaker Change: Yeah.

Speaker Change: So we have dedicated teams for both of those product lines. So we're known well.

Speaker Change: Quite a few.

Speaker Change: Business lines or geographies based on returns overtime, so and that is something that <unk>.

Speaker Change: It's just very difficult to believe.

Speaker Change: What.

Speaker Change: The size of the capacity that's going to go in I hope, it's higher right, but we are in front, we are overcapacity in both those products.

Speaker Change: Never ends.

Speaker Change: And then it becomes a question of at what point do you exit businesses like we exited.

Speaker Change: Environmental services group that was.

Speaker Change: That's really helpful. And then if we start thinking about pump margins going forward.

Speaker Change: Was actually accretive to our margin, but it just wasn't going to carry the valuation.

Speaker Change: How much like I'll call. It project selectivity are you avoiding some lower margin business and just being able to get a mix up in terms of the types of.

Speaker Change: For us.

Speaker Change: So that's kind of what we do on the portfolio side as a group.

Speaker Change: Cycled.

Speaker Change: Total cash flow of the business and then kind of if we do this correctly rotate into higher margin portion of the portfolio.

Speaker Change: Platforms that youre targeting.

Speaker Change: Yeah, I mean, if you go back to slide 10, that's part and parcel to kind of the business model. What we've gotten out of you can see what we've gotten out of inside those individuals' segment, but we've exited quite a few business lines or geographies based on rich.

Speaker Change: Great Thanks for that color.

Speaker Change: Thanks.

Speaker Change: Thank you. Our next question will come from Brett Linzey with Mizuho.

Speaker Change: Yeah.

Hey, good morning, all.

Speaker Change: Wanted to come back to tariffs. So you had previously sized it at $215 million annualized I think there was $60 million.

Speaker Change: <unk> overtime, so and that is something that.

Speaker Change: From just the one product line Youre looking to reassure I guess first any any update on the $60 million and then more broadly did you remarked the tariffs back to the higher higher rates.

Speaker Change: Never ends.

Speaker Change: And then it becomes a question of at what point do you exit businesses like we exited.

Speaker Change: Environmental services group that was.

Speaker Change: Was actually accretive to our margin, but it just wasn't going to carry the valuation.

Speaker Change: Or did you let it flow through at these lower levels for the balance of the year.

Speaker Change: Yes.

Speaker Change: For us so that's kind of what we do on the portfolio side as it.

Speaker Change: Okay.

Speaker Change: I wish we made paper clips because it would be easy right, there's a competitive dynamic positioning.

Speaker Change: We've recycled.

Speaker Change: Total cash flow of the business and then kind of if we do this correctly rotate into higher margin portion of the portfolio.

Speaker Change: Whether you want to grab market share.

Speaker Change: And everything else I think in terms of the reassuring we're on track.

Speaker Change: There we actually.

Speaker Change: Great Thanks for that color.

Speaker Change: Subsequently.

Speaker Change: Thanks.

Speaker Change: Q2, close I think we've put in some more pricing there.

Speaker Change: Thank you. Our next question will come from Brett Linzey with Mizuho.

Speaker Change: Okay.

Speaker Change: Because of the dynamics of the business, which I won't get into.

Brett Linzey: Hey, good morning, all.

Speaker Change: I wanted to come back to tariffs you previously sized it at $215 million annualized I think there was $60 million.

Speaker Change: It just gets to the point when you start trying to parse this across the portfolio. When we have the advantage in that particular market, we should be able to price in excess of any input cost. If it's hyper competitive that we're going to have to mop it up in.

Speaker Change: From just the one product line Youre looking to reassure I guess first any update on the $60 million and then more broadly did you remarked the tariffs back to the higher higher rates.

Speaker Change: In terms of productivity actions and that's why having those productivity actions every year is a little bit of a hedge for the dynamics of the marketplace anywhere.

Speaker Change: Or did you let it flow through at these lower levels for the balance of the year.

Speaker Change: Yes.

Speaker Change: So the reason we didn't put a slide there we could argue this thing into the into the dust, we don't think theres anything in the back half of the year.

Speaker Change: Hi.

Speaker Change: I wish we made paper clips because it would be easy right, there's a competitive dynamic positioning.

Speaker Change: Whether you want to grab market share.

Speaker Change: That's an additional headwind as it relates to tariffs and you can see the margin performance through the first half and our margin performance on the forecast that we think that that dynamic will continue at that point as this can be relative comps.

Speaker Change: And everything else I think in terms of the reassuring we're on track.

Speaker Change: There we actually.

Speaker Change: Subsequently.

Speaker Change: Q2, close I think we've put in some more pricing there.

Speaker Change: You see outperformance and underperformance relative to H one.

Speaker Change: Because of the dynamics of the business, which I won't get into.

Speaker Change: Got it thanks, and then just a follow up on the July order strength encouraging to see are there any specific segment drivers was it fairly broad based and then I guess.

Speaker Change: It just gets to the point when you start trying to parse this across this portfolio when.

Speaker Change: When we have the advantage in that particular market, we should be able to price in excess of any input costs.

Speaker Change: As your assumption, you'll you'll grow orders year over year in Q3 Q4 this year.

Speaker Change: Hyper competitive that we're going to have to mop it up.

Speaker Change: Yeah.

Speaker Change: With a margin of error of 100 basis points. Please yes, right now we're tracking.

Speaker Change: In terms of productivity actions and that's why having those productivity actions every year is a little bit of a hedge for the dynamics of the marketplace anywhere.

Speaker Change: That would indicate after July that book to Bill is going to be solid.

Speaker Change: Sure.

Speaker Change: So the reason we didn't put a slide there we could argue this thing into the into the dust, we don't think theres anything in the back half of the year.

Speaker Change: Alright, great. Thanks.

Speaker Change: You're welcome.

Speaker Change: Thank you. Our next question will come from Joe O'dea with Wells Fargo.

Joe O'dea: Hi, good morning.

Joe O'dea: When you think about the the demand impact of elevated uncertainty in Paris, just as you've had conversations with customers over the course of the last couple of months and talking to your business leaders.

Speaker Change: You see outperformance and underperformance relative to H one.

Joe O'dea: What is it that folks are now looking at most closely that would drive some relief from the uncertainty overhang.

Speaker Change: Got it thanks, and then just a follow up on the July order strength and encouraging to see are there any specific segment drivers was it fairly broad based and then I guess as your assumption, you'll you'll grow orders year over year in Q3 Q4 this year.

Joe O'dea: Demand.

Joe O'dea: Well I mean, we deal with some incredibly large customers that I'm sure.

Joe O'dea: Cost of capital is important in a variety of other things and ISO and one could argue that there is some very large projects that are waiting for cost of capital to come down to make the projects return higher there are some customers that have significant exposure to tariffs than we do right and then they are trying to <unk>.

Speaker Change: Yeah.

Speaker Change: With a margin of error of 100 basis points plays yeah, right now we're tracking.

Speaker Change: That would indicate after July that book to Bill is going to be solid.

Speaker Change: Alright, great. Thanks.

Speaker Change: Youre welcome.

Joe O'dea: Manage that situation. So it becomes a very big plethora in any given year. When you have a mix of kind of consumable businesses and project businesses.

Speaker Change: Thank you. Our next question will come from Joe O'dea with Wells Fargo.

Joe O'dea: Hi, good morning.

Speaker Change: When you think about the <unk>.

Speaker Change: Demand impact of elevated uncertainty and tariffs and just as <unk> had conversations with customers over the course of the last couple of months and talking to your business leaders.

Joe O'dea: They tend to run.

Joe O'dea: The same theres really very few outliers and I said that at the end of Q2.

Speaker Change: What is it that folks are now looking at most closely that would drive some relief from the uncertainty overhang on demand.

Joe O'dea: Our end of Q1.

Joe O'dea: That you could sense, some reticence in bigger projects because of a variety of different reasons doesn't mean the projects go away, but is just a little bit of a drift to the right in our particular case nothing really changes in the second half than we saw from our first half trajectory because we are not.

Speaker Change: Well I mean, we deal with some incredibly large customers that im sure <unk>.

Speaker Change: Cost of capital is important in a variety of other things that one could argue that there is some very large projects that are waiting for cost to capital to come down to make the projects return higher there are some customers that have significant exposure to tariffs than we do right and then they're trying to manage.

Joe O'dea: I don't think our expectations for retail refrigeration.

Joe O'dea: Are going to be the same rent is only six months left so that's going to drift to the right but.

Joe O'dea: No.

Joe O'dea: We have so many businesses with so many fingers in so many pies, there's no overriding.

Speaker Change: That situation so it becomes a very big plethora.

Joe O'dea: Nature other than just macro uncertainty but.

Speaker Change: In any given year when you have a mix of kind of consumable businesses and project businesses.

Joe O'dea: We seem to be doing reasonably well like I said the back the second half of the year.

Speaker Change: They tend to run.

Joe O'dea: Just.

Joe O'dea: And the element of higher <unk>.

Speaker Change: The same theres really very few outliers and I said that at the end of Q2.

Joe O'dea: Core growth rate, just because of mix and comps.

Speaker Change: Our end of Q1.

Speaker Change: That you could sense, some reticence in bigger projects because of a variety of different reasons doesn't mean the projects go away, but is just a little bit of a drift the right in our particular case nothing really changes in the second half than we saw from our first half trajectory because we are not.

Joe O'dea: And then just a clarification related to that so the revenue growth.

Joe O'dea: Before going to four to six.

Joe O'dea: That move is.

Joe O'dea: Again, one one point of FX, one point acquisition.

Joe O'dea: And then comps right.

Joe O'dea: And so that is yes, you havent taken out the point of conservatism that you put in a quarter ago.

Speaker Change: I.

Speaker Change: I don't think our expectations for retail refrigeration.

Joe O'dea: Well I mean optically, yes, we have.

Speaker Change: Are going to be the same rent is only six months left so that's going to drift to the right but.

Joe O'dea: It is basically.

Speaker Change: No.

Joe O'dea: The same forecast in terms of our one point.

Speaker Change: We have so many businesses with so many fingers in so many pies, there's no overriding.

Joe O'dea: It depends on who you want to take bottom quartile or top quartile six we added back.

Speaker Change: Nature other than just macro uncertainty but.

Joe O'dea: Yep Yep.

Joe O'dea: Got it okay. Thank you.

Speaker Change: We seem to be doing reasonably well like I said the back the second half of the year.

Joe O'dea: Welcome.

Speaker Change: Thank you we will take our next question from Julian Mitchell with Barclays.

Speaker Change: And the element of higher.

Julian Mitchell: Hi, good morning.

Speaker Change: Core growth rate, just because of mix and comps.

Speaker Change: Maybe just wanted to understand.

Speaker Change: Again, I realize there's a lot of moving parts and so on.

Speaker Change: And then just a clarification related to that so the revenue growth is two to four go into four to six.

Speaker Change: Is the broad brush organic sales growth assumption that.

Speaker Change: You accelerated slightly from first to second quarter year on year in organic revenue from wide.

Speaker Change: That move is one one point of FX one point.

Speaker Change: The acceleration in the third and then a sort of larger step up in the fourth quarter is that the way to think about it.

Speaker Change: Acquisition.

Speaker Change: And then comps the other type.

Speaker Change: And so that is yeah, you havent taken out the point of conservatism that you put in a quarter ago.

Speaker Change: The more backend loaded type ramps alright.

Speaker Change: It's FX well I mean optically, yes, we have.

Speaker Change: And Dcs.

Speaker Change: It is basically.

Speaker Change: The same forecast in terms of our one point.

Speaker Change: Generally yes.

Speaker Change: It depends if you want to take bottom quartile to top quartile six we added back.

Speaker Change: I think.

Speaker Change: If theres any conservative.

Speaker Change: Yep Yep.

Speaker Change: You could call conservative in the back is we're going to get FX wrong, and it's going to be what current spot is.

Speaker Change: Got it okay. Thank you.

Speaker Change: Welcome.

Speaker Change: Thank you we will take our next question from Julian Mitchell with Barclays.

Speaker Change: Yes, it's in our lower margin businesses.

Julian Mitchell: Hi, good morning.

Speaker Change: By the way I mean, no one said anything that we hit 25% EBITDA in consolidation, which no one would've thought not too long ago.

Speaker Change: Maybe just wanted to understand.

Speaker Change: Again, I realize there's a lot of moving parts and so on.

Speaker Change: Is the broad brush organic sales growth assumption that.

Speaker Change: Yeah, it's just a little bit of mix relative to the total revenue.

Speaker Change: You accelerated slightly from first to second quarter year on year in organic revenue from wide you have a <unk>.

Speaker Change: I don't think we.

Speaker Change: It did leave ourselves some room in Q4, but we talk about this every year, it's going to make a decision in another month or two what the strategy is going to be if we've seen an acceleration in order rates. During Q3, leading into Q4, we may take production performance up in Q4, which is positive from a margin point of view.

Speaker Change: On acceleration in the third and then sort of larger step up in the fourth quarter is that the way to think about it.

Speaker Change: The more backend loaded type ramps alright.

Speaker Change: And D C S T.

Speaker Change:

Speaker Change: Generally yes.

Speaker Change: That's helpful. Thank you and then just.

Speaker Change: I think.

Speaker Change: We can see them sort of headline bookings number for the second quarter and you talked a little about July.

Speaker Change: If there's any conservatism.

Speaker Change: Call Conservative in the back is we're going to get FX wrong, and it's going to be what current spot is.

Speaker Change: With the broad sort of sense of demand in recent months the book to Bill I suppose in the second quarter, maybe a touch below plan, but nothing to get worried about and in overall demand was fairly steady across youll sort of largest customer categories. In recent months I guess was there any.

Speaker Change: Yes, it's in our lower margin businesses, which by the way I mean, no one said anything that we hit 25%.

Speaker Change: EBITDA in consolidation, which no one would've thought not too long ago.

Speaker Change: Yeah, it's just a little bit of mix relative to the total revenue.

Speaker Change: Sign of sort of volume elasticity as price started to move up or anything like that that sort of changed in the last couple of months.

Speaker Change: I don't think so.

Speaker Change: We did leave ourselves some room in Q4, but we talk about this every week can make a decision in another month or two what the strategy is going to be if we've seen an acceleration in order rates. During Q3, leading into Q4, we may take production performance up in Q4, which is positive from a margin point of view.

Speaker Change: Well look we tried to pick apart this book to Bill based on seasonality and if you go back over time, it's actually down in Q2, and then ramps up in Q3, but.

Speaker Change: The only one that I would say is that from bookings we would have thought in Q2 that refrigeration would have been better.

Speaker Change: That's helpful. Thank you and then just.

Speaker Change: We can see the sort of headline bookings number for the second quarter and you talked a little about July.

Speaker Change: So we've taken out our full year forecast in refrigeration, just the not the <unk> business because the margin was actually up but I'm just the standard case business I think it's running out of time to meet our expectations that was built into the forecast.

Speaker Change: With the broad sort of sense of demand in recent months the book to Bill I suppose in the second quarter, maybe a touch below plan, but nothing to get worried about and <unk>.

Speaker Change: Overall demand was fairly steady across youll sort of largest customer categories. In recent months I guess was there any sign of sort of volume elasticity as price started to move up or anything like that that sort of changed in the last couple of months.

Speaker Change: And then.

Speaker Change: Portland as I mentioned before the portfolio arguably is more short term today than it was in the past.

Speaker Change: And we're not worried about bookings in the quarter and the fact that it's begun to ramp up if you back test that over the last five years is doing what it always right. So.

Speaker Change: Well look we tried to pick apart this book to Bill based on seasonality and if you go back over time, it's actually down in Q2, and then ramps up in Q3, but.

Speaker Change: No I don't think anything has changed in terms of booking.

Speaker Change: We always worry about we've had great bookings that does it just come down in the back half of the year as our customers cleared the inventory we don't generally.

Speaker Change: Hi.

Speaker Change: The only one that I would say is that from bookings we would have thought in Q2 that refrigeration would've been better.

Speaker Change: While we almost take it 90 day in increments from where we are so based on what we see in July we're encouraged by the trajectory of the bookings.

Speaker Change: That's great. Thank you.

Speaker Change: Youre welcome. Thanks.

Speaker Change: Thank you our final question will come from Scott Davis with Melius research.

Speaker Change: And then.

Speaker Change: Portland as I mentioned before the portfolio arguably is more short term today than it was in the past.

Speaker Change: Good morning, guys.

Speaker Change: Hey, Scott No question last last but not least I hope but.

Speaker Change: Yes.

Speaker Change: And we're not worried about bookings in the quarter and the fact that it's begun to ramp up if you back test that over the last five years, it's doing what it always right. So.

Speaker Change: We just went through an entire call and no one asked about M&A, which I find kind of <unk>.

Speaker Change: Interesting because they are poor.

Speaker Change: Portfolio itself I don't think can drive, 16% EPS growth forever.

Speaker Change: No I don't think anything has changed in terms of booking we always worry about we've had great bookings that does it just come down in the back half of the year as our customers clear clear the inventory we don't generally.

Speaker Change: Without a healthy dose of velocity of M&A. So.

Speaker Change: Sure.

Speaker Change: Core deal looks interesting are there other <unk> out there are there how do you guys kind of think about that and if you disagree with my statement I guess too because.

Speaker Change: Well, we almost take it 90 day in increments from where we are so based on what we see in July we're encouraged by the trajectory of the bookings.

Speaker Change: I'm glad you asked it.

Speaker Change: Yeah look I mean at the end of the day, we never get any credit for capital deployment. So.

Speaker Change: It's just delay it is to a certain extent at all.

Speaker Change: That's great. Thank you.

Speaker Change: Youre welcome. Thanks.

Speaker Change: I will tell you that we've got close to $400 million in revenue under LOI, meaning that we've got.

Speaker Change: Thank you our final question will come from Scott Davis with Melius research.

Scott Davis: Good morning, guys.

Speaker Change: Letter of intents on a total of $400 million worth of revenue.

Speaker Change: Hey, Scott No question last.

Scott Davis: Last but not least I hope but.

Speaker Change: Realistically I can tell you I've got 50, but real M&A that gets consummated within six to eight months.

Scott Davis: Yes.

Speaker Change: We just went through an entire call no one asked about M&A, which I find kind of interesting because there the portfolio itself I don't think can drive 16% EPS growth forever.

Speaker Change: We transact on all of them no.

Speaker Change: But can be transit act between now and they ended the year on it absolutely can so.

Speaker Change: Without a healthy dose of velocity of M&A. So.

Speaker Change: This core deal looks interesting are there other <unk> out there are there how do you guys kind of think about that.

Speaker Change: They are.

Speaker Change: So capital deployment.

Speaker Change: As.

Speaker Change: Disagree with my statement I guess too because.

Speaker Change: Important to us I think the nature of our capital.

Speaker Change: I'm glad you asked it.

<unk> is going to be what you've seen over the last five years, So no big swings.

Speaker Change: Yeah look I mean at the end of the day, we never get any credit for capital deployment. So that's just delay it is to a certain extent at all.

Speaker Change: But part and parcel for us to continue driving the margin up with the portfolio M&A is a factor.

Speaker Change: I will tell you that we've got close to $400 million in revenue under LOI, meaning that we've got.

Speaker Change: There's been not a lot of deals out there so.

Speaker Change: This notion of what is <unk>.

Speaker Change: Customer expectation and the deals are coming to market because everybody is waiting for the cost of capital to come down blah blah blah, but the deals that we have out there for the most part our proprietary deals that are not auctions.

Speaker Change: Letter of intents on a total of $400 million worth of revenue.

Speaker Change: Realistically I can tell you I've got 50, but real M&A that gets consummated within six to eight months.

Speaker Change: <unk>.

Speaker Change: The nature of the businesses are.

Speaker Change: Transact on all of them no.

Speaker Change: But can be transit act between now and they ended the year on it.

Speaker Change: Lower execution risk because of the size of the deals so.

Speaker Change: Certainly we can.

Speaker Change: So.

Speaker Change: I feel pretty good despite the lack of deals coming to market like the ones that we've got in the pipe.

Speaker Change:

Speaker Change: So capital deployment.

Speaker Change: As <unk>.

Speaker Change: Important to us I think the nature of our capital employment is going to be what you've seen over the last five years, So no big swings.

Speaker Change: Yes that makes sense.

Speaker Change: Can I ask this question I mean, you mentioned, 20% of your portfolio growing double digits, but.

Speaker Change: The secular growth platform that all makes sense, but.

Speaker Change: But part and parcel for us to continue driving the margin up of the portfolio M&A as a factor there's been not a lot of deals out there. So.

Speaker Change: What does that imply for the other 80.

Speaker Change: Simple answer is always GDP, but not all not all of our children can be above average.

Speaker Change: This notion of what is.

Speaker Change: Customer expectation and the deals are coming to market because everybody is waiting for the cost of capital to come down blah blah blah, but the deals that we have out there are proprietary for the most part our proprietary deals they are not auctions.

Speaker Change: What about the other.

Speaker Change: 80% in aggregate.

Speaker Change: I guess, maybe a different way to ask the questions. What do you think that.

Speaker Change: What do you think your entitlement growth rate is in this new portfolio because it has silver has changed a fair amount since you've been since you've gotten there.

Speaker Change: We are the nature of the businesses are.

Speaker Change: Yes, I mean, I don't want to back into the GDP one.

Speaker Change: <unk>.

Speaker Change: What's important in terms of the platforms.

Speaker Change: Lower execution risk because of the size of the deal so.

Speaker Change: I feel pretty good despite the lack of deals come in coming to market like the ones that we've got in the pipe.

Speaker Change: Is four of the five are organically driven so in terms of what that growth for out of the five is a reflection of that we actually have stepped up R&D over the last six years, so thats, the fruits kind of our own labor.

Speaker Change: Yes that makes sense.

Speaker Change: Can I ask this question I mean, you mentioned, 20% of your portfolio growing double digits.

Speaker Change: Second our growth platform that all makes sense, but.

Speaker Change: Which I think is sometimes lost in the conversation and the other one of those on slide eight that is largely driven by M&A as the clean energy component business.

Speaker Change: What does that imply for the other 80.

Speaker Change: Simple answer is always GDP, but not all not all our children can be above average.

Speaker Change: Which has changed the dynamics of the value of what was the fueling solutions business.

Speaker Change: Or do you think about the other 80% in aggregate and I guess, maybe a different way to ask the question is what do you think that.

Speaker Change: Hum.

Speaker Change: What do you think your entitlement growth rate is in this new portfolio because it has Dover has changed a fair amount since you've been since you've gotten there.

Speaker Change: So yes.

Speaker Change: I don't want to go through them one by one but we have different business models that were running here we're running some.

Speaker Change: That looks like they don't grow but it is us just exiting portions of those portfolios.

Speaker Change: Yes, I mean, I don't want to back into the GDP, one I think.

Speaker Change: Are never going to reach the value that we want so if you went back and looked over time.

Speaker Change: What's important in terms of the platforms.

Speaker Change: Is four of the five are organically driven.

Speaker Change: Of the clean energy business and your takeaway.

Speaker Change: In terms of what that growth for out of the five is a reflection of that we actually have stepped up R&D over the last six years, so thats, the fruits kind of our own labor.

Speaker Change: <unk>.

Speaker Change: The acquisitions that were made there willingly shrunk portions of that business same thing with refrigeration, we exited I would venture to say a couple of hundred million worth of revenue because it wasn't providing the returns that we wanted and Thats why youll see the margin accretion in that business go significantly higher than where it was in the past.

Speaker Change: Which I think is sometimes lost in the conversation the other one of those on slide eight that is <unk>.

Speaker Change: Largely driven by M&A as the clean energy component business, which has changed the dynamics of the value of what was the fueling solutions business.

Speaker Change: So I know, it's hard to read through because it looks like hey, wait a minute this thing doesn't grow.

Speaker Change: But we've been.

Speaker Change: Until very recently shrinking organically.

Speaker Change:

Speaker Change: So yeah I mean.

Speaker Change: To willfully drive value within the portfolio by bringing the margins up.

Speaker Change: I don't Wanna go through them, one by one but we have different business models that were running here we're running some.

Speaker Change: Which I think we like the businesses that we have now and I think go forward, you'll see the real organic growth rate as opposed to kind of us cleaning up the portfolio over time.

Speaker Change: It looks like they don't grow but it is us just exiting portions of those portfolios that.

Speaker Change: Never going to reach the value that we want so if you went back and looked over time.

Speaker Change: The clean energy business any takeaway.

Speaker Change: That makes a ton of sense I appreciate the integrity of the answer and the honest tea. So thanks.

Speaker Change: <unk>.

Speaker Change: The acquisitions that were made there we willingly shrunk portions of that business same thing with refrigeration, we exited I would venture to say a couple hundred million dollars worth of revenue because it wasn't providing the returns that we wanted and Thats why you see the margin accretion in that business go significantly higher than where it was in the past.

Speaker Change: Thanks Scott.

Speaker Change: Yeah.

Speaker Change: Thank you that concludes our question and answer period Andover second quarter 2025 earnings Conference call. You May now disconnect. Your line at this time and have a wonderful day.

Speaker Change: So I know, it's hard to read through because it looks like hey, wait a minute this thing doesn't grow.

Speaker Change: We've been up until very recently shrinking organically.

Speaker Change: To willfully drive value within the portfolio by bringing the margins up.

Speaker Change: Which I think we like the businesses that we have now and I think go forward, you'll see the real organic growth rate as opposed to kind of us cleaning up the portfolio over time.

Speaker Change: That makes a ton of sense I appreciate the integrity of the answering the honesty. So thanks.

Scott Davis: Thanks Scott.

Scott Davis: Okay.

Scott Davis: Thank you that concludes our question and answer period Andover second quarter 2025 earnings Conference call. You May now disconnect. Your line at this time and have a wonderful day.

Scott Davis: Mhm.

Scott Davis: [music].

Scott Davis: Okay.

Scott Davis: [music].

Scott Davis: Okay.

Scott Davis: Hum.

Scott Davis: Okay.

Scott Davis: [music].

Scott Davis: Okay.

Scott Davis: [music].

Scott Davis: Mhm.

Q2 2025 Dover Earnings Call

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