Q4 2025 Ecolab Inc Earnings Call

February 10, 2026

Speaker #1: Greetings. Welcome to Ecolab's fourth quarter 2025 earnings release conference call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation.

Operator: Greetings. Welcome to Ecolab's Q4 2025 Earnings Release Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 from your telephone keypad. As a reminder, this conference is being recorded. At this time, it's now my pleasure to introduce your host, Andy Hedberg, Vice President of Investor Relations. Andy, you may now begin.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: At this time, it is now my pleasure to introduce your host, Andy Hedberg, Vice President of Investor Relations. Andy, you may now begin.

Speaker #2: Thank you. Hello, everyone, and welcome to Ecolab's fourth quarter conference call. With me today are Christophe Beck, Ecolab's Chairman and CEO, and Scott Kirkland, our CFO.

Andy Hedberg: Thank you. Hello everyone, and welcome to Ecolab's Q4 Conference Call. With me today are Christophe Beck, Ecolab's Chairman and CEO, and Scott Kirkland, our CFO. A discussion of our results along with our earnings release, and the slides referencing the quarter's results are available on Ecolab's website at ecolab.com/investors. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplemental materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the risk factors section in our most recent Form 10-K and in our poster materials. We also refer you to the supplemental diluted earnings per share information in the release. With that, I'd like to turn the call over to Christophe Beck for his comments.

Q4 2025 Ecolab Inc Earnings Call

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Q4 2025 Ecolab Inc Earnings Call

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Tuesday, February 10th, 2026 at 6:00 PM

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Christophe Beck: Thank you so much, Andy, and welcome to everyone joining us today. 2025 was another record year for Ecolab with record-breaking sales, margins, earnings per share, and free cash flow. This was all enabled by the exceptional total value our team and technologies delivered to customers, helping them achieve better business outcomes, operational performance, and environmental impact. Thanks to our team's dedication and expertise, we're entering 2026 with strong momentum and are very well positioned to deliver continued high performance with confidence. In Q4, we delivered 15% adjusted EPS growth, with quarterly growth strengthening throughout the year. This was driven by accelerating underlying sales growth and continued strong OI margin expansion. Organic sales grew 3%, driven by 3% value pricing and positive volume growth. Volume actually was stronger than it appeared, with performance improving across most of our businesses.

Christophe Beck: Food and beverage accelerated to 5%, pest elimination and life sciences both accelerated to 7%, and specialty continued to drive significant share gains, growing 7% as well. Institutional underlying sales growth was consistent with prior quarters, excluding the unexpected short-term impact from lower distributor inventories. We also maintained strong double-digit growth in Global High-Tech and Ecolab Digital. Taken together, this strong momentum lifted Ecolab's underlying volume growth to 2%, driving mid-single-digit underlying organic sales growth when we exclude impact from basic industries, paper, and these lower distributor inventories. In other words, our core businesses and our growth engines are doing very well. We expect the distributor impact to largely normalize in Q1 2026. We also continue to anticipate basic industries and paper's performance to progressively improve in 2026.

Christophe Beck: Combined with strong new business wins and continued momentum across our growth engines, we expect volume growth to get back to 1% as we exit Q1, with growth accelerating further as the year progresses. Our strengthening underlying sales drove organic operating income growth of 12% and expanded our organic operating income margin by 140 basis points to 18.5%. This resulted in a full-year operating income margin of 18%, 150 basis points versus last year. We're confident we can continue to expand our OI margin well beyond the 20%. Now, before I move into our 2026 outlook, I want to take a moment to acknowledge current events in Minnesota. Ecolab has customers in more than 170 countries, but Minnesota has been our home for more than a century. It is where our headquarters sits and where thousands of our colleagues, customers, and communities count on us every single day.

Christophe Beck: In recent weeks, Ecolab, along with other business leaders across the state, have come together to call for de-escalation and a constructive path forward. As a company that has always believed in doing well by doing good, we stepped in early to help rally business leadership and support the efforts underway. I'm proud of the progress we're seeing and encouraged by the positive momentum. As expressed in an open letter signed by 60 Minnesota-based CEOs, the business community has an important role in supporting stability, strengthening local businesses, and helping build a brighter future for Minnesota. We will continue to work together to help ensure Minnesota remains a strong and resilient place to live, work, and grow. Now, looking ahead to 2026, our priorities are very clear. First, it's rapidly grow Total Value Delivered to customers across our core businesses. Second, it's to accelerate our One Ecolab Growth Initiative.

Christophe Beck: And third, it's to fuel our growth engines. We expect 3% to 4% organic sales growth this year, with growth accelerating as the year progresses, driven by strengthening volume gains and continued 2% to 3% value price. Total reported sales, including the Ovivo electronics acquisition, is expected to grow upper single digits in 2026. And with this strong growth, OI margin is anticipated to expand 100 to 150 basis points to more than 19%, resulting in an OI growth of 14% to 16%. Altogether, this is expected to drive strong EPS growth of 12% to 15%, which includes the headwind of additional non-cash amortization from the Ovivo acquisition. Our first priority is to rapidly grow total value delivered, or as we call it, TVD. Across our core businesses, TVD is our formal framework for measuring the business outcomes, operational performance, and environmental impact we deliver to customers.

Christophe Beck: When we deliver measurable value across these three dimensions, it not only drives share gains, but it earns Ecolab's ability to value price. With a strong customer value pipeline heading into 2026, we remain very confident in delivering 2% to 3% pricing this year. What makes our value model so powerful is our best-in-class approach. With our scale, digital intelligence, and global service, Ecolab partners with customers to define what best-in-class looks like and scale it across their operations, helping them achieve peak performance. This is how we consistently help customers lower costs, reduce risk, and improve performance across their entire enterprise. Innovation is also essential to our best-in-class value model, and our 2026 lineup is strong and keeps getting stronger. In Global High-Tech, we're launching direct-to-chip cooling as a service to the data center market. This brings liquid cooling right where it's needed the most, the chip.

Christophe Beck: By combining our CDU platform with Ecolab 3D TRASAR real-time monitoring, advanced coolant technology, and on-site service, we improve uptime, lower cooling costs, and allow more power to be put towards compute. In food and beverage, we're launching CIP IQ, an AI-enabled digital solution that uses real-time analytics for a smarter way to optimize cleaning plants. It decreases capacity, reduces water and energy use, and improves quality control and product safety, helping customers run more efficiently at a time when every hour of production matters. Early interest is strong, and we're looking forward to a healthier rollout in 2026. In institutional specialty, we focused on scaling our IQ suite: DishIQ, AquaIQ, KitchenIQ, and BeverageIQ. These solutions directly address labor shortages, guest satisfaction, and rising operating costs, giving operators smarter, more automated ways to run their kitchens and front-of-the-house operations.

Christophe Beck: We expect strong growth from the suite in 2026 as well. In pest elimination, we're expanding beyond our road-and-focus smart devices with a new smart solution for cockroaches, extending the reach and impact of our pest intelligence platforms. Moving into our second priority in 2026, expanding the One Ecolab Growth Initiative. We've demonstrated immense success over the last year. We've aligned our global resources to better serve our top 35 global customers, where there is a $3.5 billion growth opportunity. In 2025, sales growth with this group outpaced total company by approximately 2 percentage points. This year, we're expanding this model to our largest regional customers around the world, leveraging the tools, processes, and sales structures built for our top 35 customers. Within One Ecolab, we've also delivered more than $100 million in SG&A savings as of year-end 2025.

Christophe Beck: We achieved this by consolidating functional work into our global centers of excellence and deploying a number of agentic AI applications as one of the most advanced companies. As we shared at Investor Day, our initial One Ecolab rollout exceeded expectations, allowing us to increase our savings target from $140 million to $225 million by 2027. Today, we're increasing our savings target again to $325 million by the same year, 2027, due to the continued success of the overall program. Finally, looking at our growth engines, they now represent about 20% of our portfolio, including Ovivo electronics, which closed earlier than expected. Together, our growth engines have very attractive long-term OI margin profiles, and in 2026, we expect them to collectively grow double digits, lifting Ecolab's sales growth.

Christophe Beck: When we look at what's fueling that trajectory, Global High-Tech is leading the way as AI expands and every part of its value chain depends on water: the fabs that make the chips, the power plants that fuel the chips, and the data centers that run and cool them. Ecolab is uniquely positioned in all these markets to help enable the AI buildout. With Ovivo electronics now part of Ecolab, we provide the ultra-pure water essential for semiconductor manufacturing, supporting the fabs producing the world's most advanced chips. As we bring our unmatched capabilities together, we're building a unique circular water offering for the fast-growing microelectronics sector. And Ovivo is off to a strong start in 2026 as we have already secured several new fabs where our leading ultra-pure water technologies will be deployed.

Christophe Beck: On the data center side, the industry expects unprecedented demand for AI to continue to rapidly expand. Higher rack densities and rising chip heat make liquid cooling mission-critical. Our direct-to-chip cooling platform, including integrated 3D TRASAR monitoring and on-site service, positions us to help data centers improve cooling asset performance, reduce the power required to cool, and return more power to compute. And as the industry increasingly turns to water to cool next-generation chips like NVIDIA's Vera Rubin platform, we're very well positioned, backed by more than a century of experience managing cooling and water systems in complex environments at scale. As strong as that momentum is, it's only part of our growth engine story. Another major contributor is pest elimination. Nearly every Ecolab customer today uses some form of pest elimination.

Christophe Beck: With our One Ecolab selling strategy, we're unlocking a $3 billion cross-sale opportunity by delivering the most compelling outcomes in the industry, targeting 99% pest relocation through our digital connected pest intelligence platform. We're leaders in deploying digital technologies to this commercial market and expect to have more than 1 million smart devices in the field in 2026. This technology not only drives best-in-class outcomes for our customers, but it also frees our team to spend more time driving strong sales growth while continuing to expand margin. We're also seeing exceptional progress in life sciences. We delivered our best year yet in bioprocessing. We saved up nearly 75% in 2025. Life sciences has the potential to be one of Ecolab's highest margin businesses, where we target long-term operating margins of 30%.

Christophe Beck: We're investing behind this attractive and significant long-term opportunity with breakthrough biopharma purification innovations, new digital solutions, and capacity expansions. That includes the capacity expansion of our life sciences industrial water purification business, which is expected to begin production in the second half of this year, removing the constraints that created a drag in 2025 and positioning us for stronger growth in the years ahead. The fourth engine powering our growth is Ecolab Digital. We've grown this business to only $400 million in annual sales, increasing more than 20% in 2025, and we're still in the very early days. We're investing heavily to bring market-leading digital solutions to our customers across our portfolio. In 2025, more than 25% of our innovation pipeline was digital, which has grown significantly over the last few years.

Christophe Beck: Thank you. We'll now be conducting a question and answer session. We ask that you please limit yourself to one question per caller, so those who will have a chance to participate. If you have additional questions, please rejoin the Q&A queue. If you'd like to ask a question at this time, you may press star one from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. And our first question is from the line of Tim Mulrooney with William Blair. Please proceed with your question.

Operator: Thank you. We'll now be conducting a question and answer session. We ask that you please limit yourself to one question per caller, so those who will have a chance to participate. If you have additional questions, please rejoin the Q&A queue. If you'd like to ask a question at this time, you may press star one from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. And our first question is from the line of Tim Mulrooney with William Blair. Please proceed with your question.

Christophe Beck: As mentioned, F&B, which we're building around this F&B united idea of bringing hygiene and water very closely together. That's done in North America. Well, it's accelerated to 5%, life science to 7%, pest to 7%, water X, paper, and basic to 5%. And INS X, this distribution inventory story there, well, was going the same at 4% with specialty steady at 7%. So in other words, what I really like is that our portfolio is shifting to higher growth, higher margin businesses, which is exactly where we want to go. And we did, obviously, so with the 15% of the portfolio, that needs work. There will always be something. And I expect paper and basics to kind of get to a much better place as we progress in 2026.

Christophe Beck: As mentioned, by 2030, we expect an incremental need of power for the whole of the electrical consumption of India and the incremental needs of the freshwater use of the whole United States. So at the end of the day, well, at the heart of AI is water, as mentioned before, to produce the chips because they're produced in ultra-pure water, to power the chips because power generation is the second largest water user in the world after agriculture. And the third one is to cool chips, which is shifting towards water at the same time. So high-growth market where water is at the heart of it, and especially so on those two key areas of fabs and data centers. And one might argue that power generation is also part of it, was kind of a flat market for a very long time.

Christophe Beck: Well, that's changing because we need much more power. That's going to help as well on the side, but it's not part of our Global High-Tech. So the way we're thinking about building it on fabs, since one fab requires the amount of water equivalent to 17 million people, that's an example in Korea, for instance, there. Well, the solution is to provide technology where you can recirculate water within the fab, which is really hard because at the same time, the quality of the water that's used to produce the chip is directly correlated to the quality of the advanced chips, and that's 1,000 times more pure than water that's used in blood injections, by the way. So recycling water that's difficult to recycle at the super high standard. Well, that's exactly what Ovivo helps us to do.

Christophe Beck: That was the piece of the puzzle that was missing for us. And now we can provide to the semiconductor manufacturers with circular water solutions, and we're seeing very high interest from the key players out there. And the second and last I'll mention is data centers. Well, for a long time, they've been air-cooled. That required cooling towers with a lot of water that we've been used to manage for a very long time. Now that's shifting to liquid cooling, which means that you reuse the liquid in the data center, a liquid that's coming straight on top of the chip. And that liquid is not water today, but it's getting towards water tomorrow because it's the liquid with the best thermal properties, which is what we master the most as well at the same time.

Benjamin Luke McFadden: Yeah. Thanks, Ashish. Similar to the targets we set out at Investor Day last fall, this 100 to 150 basis points is anchored on really two things: gross margins, which is at 75 to 100 basis points annually, which we're thinking about that long-term, same sort of targets for 2026, and then this 25 to 50 basis points of SG&A leverage annually through 2030. So that's how we get to this 100 to 150 basis points. And then just diving into the gross margin, the drivers of that being the value-based pricing that Christophe referenced, our mix of businesses, as you see these growth engines being higher margin businesses, but also innovation. And then on the SG&A savings, if you look at over the last five years, we've delivered sales productivity almost 30%, which is sort of sales per head, which is part of that driver.

Scott Kirkland: Yeah. Thanks, Ashish. Similar to the targets we set out at Investor Day last fall, this 100 to 150 basis points is anchored on really two things: gross margins, which is at 75 to 100 basis points annually, which we're thinking about that long-term, same sort of targets for 2026, and then this 25 to 50 basis points of SG&A leverage annually through 2030. So that's how we get to this 100 to 150 basis points. And then just diving into the gross margin, the drivers of that being the value-based pricing that Christophe referenced, our mix of businesses, as you see these growth engines being higher margin businesses, but also innovation. And then on the SG&A savings, if you look at over the last five years, we've delivered sales productivity almost 30%, which is sort of sales per head, which is part of that driver.

Benjamin Luke McFadden: Yeah. Thanks, John. As we've talked about in the past, we don't really think about incremental margins in that way. But I get your point on life sciences and pest. The life sciences, you saw the OI growth in low single digits in Q4. But frankly, that was as we expected because we had targeted OI margins in that mid-teen range. And it was due to two things. One, as we've talked about, we're investing in that business. Underlying margins are actually better. And then on top of it, you had a year-on-year comparison, sort of bad comp, if you will, on life sciences, really because of performance-based compensation. And that business sales accelerate throughout the year, as Christophe talked about. And the OI growth for the full year was 30%. And so they've earned that performance-based compensation.

Scott Kirkland: Yeah. Thanks, John. As we've talked about in the past, we don't really think about incremental margins in that way. But I get your point on life sciences and pest. The life sciences, you saw the OI growth in low single digits in Q4. But frankly, that was as we expected because we had targeted OI margins in that mid-teen range. And it was due to two things. One, as we've talked about, we're investing in that business. Underlying margins are actually better. And then on top of it, you had a year-on-year comparison, sort of bad comp, if you will, on life sciences, really because of performance-based compensation. And that business sales accelerate throughout the year, as Christophe talked about. And the OI growth for the full year was 30%. And so they've earned that performance-based compensation.

Christophe Beck: So maybe a few points here to build on what Scott just said. Not every quarter is created equal. You can have year-on-year obviously some comparisons like our acquisitions in pest elimination, which were unfortunate a year prior. Obviously, that's changing obviously the margin profile on a year-on-year basis. It's also investment pacing by business. We all, in the spirit of investing the right way, at the right time, it's not always equal in every quarter. And here I'm speaking about life science, for instance, as well. But generally, it's really making sure that we get to beat the 20% OI margin that we've talked about so far 2027. We feel really good about it. So we're at 18%. So last year, we're planning to be north of 19% in 2026.

Benjamin Luke McFadden: Good afternoon. Christophe, if we could just dig in a little bit to what you're seeing in the global water business. Over the last couple of quarters, there's been a bit of a divergence between light and heavy within water. Mining seems mixed, perhaps some life-concerning metals. F&B seems like it's inflected, and papers continue to be a drag. But can you just kind of give the way you give us some insights on how you're thinking about that business in 2026, what you would need to see at the top and the bottom end? And forgive me for coming up in my own range, but to the 3.5% to 4.5% range, call it fourth, fifth point, obviously. Just how are you thinking about this business, and what are you hearing from your teams to kind of confirm or deny the bottom or the top end of that range?

Chris Parkinson: Good afternoon. Christophe, if we could just dig in a little bit to what you're seeing in the global water business. Over the last couple of quarters, there's been a bit of a divergence between light and heavy within water. Mining seems mixed, perhaps some life-concerning metals. F&B seems like it's inflected, and papers continue to be a drag. But can you just kind of give the way you give us some insights on how you're thinking about that business in 2026, what you would need to see at the top and the bottom end? And forgive me for coming up in my own range, but to the 3.5% to 4.5% range, call it fourth, fifth point, obviously. Just how are you thinking about this business, and what are you hearing from your teams to kind of confirm or deny the bottom or the top end of that range?

Christophe Beck: I'd love to, Chris. Water is half the company. It's a big chunk of it. We've built that business since 2011, obviously, when we acquired Nalco. Our ambition was really to create the world's water company. We've come to that ambition over the last 10 years. There is that feeling that we're just getting started on that journey. Now, that being said, we're serving many end markets with water. Obviously, some are growing very fast, and some are growing a little bit less. But no one has the capabilities that we do have and the reach that we have around the world, plus the digital technology that we bring into it in order for our customers to reuse and recycle water. So in a closed circle, as mentioned, so for the GHT or Global High-Tech example, as I described a little bit before.

Christophe Beck: So if we look at the performance of that business, Chris, yes, we grew 2% organic in Q4 as a whole. But if you exclude basic and paper, which are in a downpour of the cycle, well, water was growing 5% in Q4, which is very strong performance. And we still want to get better than that. As I mentioned, so the biggest business in there is food and beverage. We are merging hygiene and water to provide the best solutions for our customers around the world. We've done it in North America. It's led to very good results. 5% for that business is good in an industry that's flat, by the way. I mean, the end customers that we are serving as well here. And we've only done North America with F&B United. We're going to keep expanding around the world.

Christophe Beck: Then there is the Global High-Tech story that I just described before, Chris, which is close to $1 billion, which is growing. So in strong double-digit rates with very high margins as well at the same time. And then you have all the businesses in between, from manufacturing areas, for instance, to our institutional water business as well, which is providing water services to our institutional businesses as well, bottom line. So we end up with a business that's underlying growth is close to the mid-singles. So this 5% dragged down by basic and paper. But those two will recover. That's the good and the less good things of a little bit more cyclical businesses. And we will deal with that. So you bring together strong underlying growth, acceleration in Global High-Tech, and recovering of basic and paper industries.

Christophe Beck: Yeah. New business is the number 1 focus of the whole company. We have this mantra of we're all in sales. So no one is not selling in the company. It's either you're dealing with customers every single day, or you're supporting someone. We're serving customers every single day. I have this objective myself to meet, once a week, the CEO of a customer. And last year, I met close to 100 customers as well. So this is where we all collectively spend most of our time. Now, we are focusing first and foremost on our current customers and our largest customers as well. As mentioned earlier, our top 35 customers have a gross potential of $3.5 billion. Well, this is where we want to focus our attention first and foremost because it's the most obvious growth to get.

Christophe Beck: And that's why we're growing much faster with those customers than everyone else. And it's the most cost-effective way, obviously, so to get new business because we have service people going into those sites already today. So it's extending the share of wallet. And at the same time, it's helping our customers because we go with end-to-end solutions, helping them get to best-in-class performance. They get better Total Value Delivered, better for their P&L. We get a share of it. So at the same time, we get higher growth, better margin for us, and it's a better deal for our customers. That's the first priority that we have. And second, it's to do the same for our local large customers around the world. And the third priority are more the individual customers around the world.

Christophe Beck: The last thing I'd say, we had our global blitz two weeks ago, which is engaging the whole organization around the world on new business. Within one week, we managed to grow our new business versus the same week a year ago by over 30% during that week as well. So a very good story. Our value proposition is very well received by our customers because they need it more than ever, either because they don't have enough water, or they're trying to improve their cost performance because they have price pressure, cost pressure, and so on. This is the value that Ecolab provides to them. This is the way we sell. And this is why our new business is going very well, while retention remains very stable as well across our businesses around the world.

Benjamin Luke McFadden: Great. Excuse me. Thank you. I guess I wanted to ask a couple kind of maybe kind of punchlist items here. But usually, you all have a view on FX that's included in your guidance. And I didn't see one in this press release, Scott. I was wondering if you could talk about the FX rates that are implicit in your EPS guidance rates. So that was kind of one there. And then on the expected volume improvements on the water side, Christophe, are you seeing that? Is this just going to be a comps game where the comps get easier? Or are you, in fact, expecting the volumes in some of those more challenged industries to actually improve? And if so, what are you looking at that gives you that indication? Thank you.

Andrew Wittmann: Great. Excuse me. Thank you. I guess I wanted to ask a couple kind of maybe kind of punchlist items here. But usually, you all have a view on FX that's included in your guidance. And I didn't see one in this press release, Scott. I was wondering if you could talk about the FX rates that are implicit in your EPS guidance rates. So that was kind of one there. And then on the expected volume improvements on the water side, Christophe, are you seeing that? Is this just going to be a comps game where the comps get easier? Or are you, in fact, expecting the volumes in some of those more challenged industries to actually improve? And if so, what are you looking at that gives you that indication? Thank you.

Christophe Beck: Thank you, Andy. So let me start with the second part, and then I'll pass the FX to Scott. So very different questions, obviously. The new business for the whole company has kept going up in absolute terms, so dollar of net new business, so net of what we might have lost, which is very little usually. This is true for water. And this is true for the challenged businesses as well of basic and paper. They also got to record new business. It's just that the demand then afterwards of those businesses is lower year-over-year. And that's driving the growth or the slight decline that these two businesses are experiencing as well at the same time. But generally, new business, Andy, is a very strong proposition for us.

Benjamin Luke McFadden: Yeah. Happy to answer the mechanical questions, Andy. So on the FX for 2026, we're not expecting significant help or hurt. We're sort of thinking it's neutral the year, just given the current position of the dollar, probably slightly favorable in the first half, but really assuming neutral in the second half going in. Obviously, the FX is pretty dynamic, the macro environment. So that could change. But that's our going-in assumption. But even any upside in the first half, as you look at sort of all items below OI, there's going to be offsets to that as we had in our guidance that the tax rate is going to go up from the 20.2% we had this year to somewhere between 20.5% to 21.5%. And then also, which wasn't in our specific guidance, but other income is going to be a little bit of a headwind.

Scott Kirkland: Yeah. Happy to answer the mechanical questions, Andy. So on the FX for 2026, we're not expecting significant help or hurt. We're sort of thinking it's neutral the year, just given the current position of the dollar, probably slightly favorable in the first half, but really assuming neutral in the second half going in. Obviously, the FX is pretty dynamic, the macro environment. So that could change. But that's our going-in assumption. But even any upside in the first half, as you look at sort of all items below OI, there's going to be offsets to that as we had in our guidance that the tax rate is going to go up from the 20.2% we had this year to somewhere between 20.5% to 21.5%. And then also, which wasn't in our specific guidance, but other income is going to be a little bit of a headwind.

Christophe Beck: But maybe a point on this FX because it's always, when we think about the next year or the beginning of the year, so what are the assumptions that we've taken. When I think a year ago or even all the years prior, Andy, we were almost never right. We thought that FX would be a massive headwind in 2025, while it was not. We thought that our delivered product cost would be pretty benign. Okay, the whole tariff situation changed quite a bit during the year as we now. And we adjusted. So we've gotten used to become very agile to adapt to local conditions and make absolutely sure that we still deliver out to up to $15 earnings per share. So we hope or we think that FX is going to be pretty benign in 2026. Maybe it's not.

Benjamin Luke McFadden: Yeah. Christophe said it very well, Vincent. The savings momentum is better than we expected, as you said, moving from that 225 to the 325 now by 2027. And it's that way as we're learning, but also moving up the value chain as we deploy technology and AI in these high-touch processes and then leveraging the global COEs that Christophe referenced before, which allows us to deploy that technology at scale. But I think as we think about 2026 to 2027, that incremental $200 million from what we've already realized, I would think about that pretty evenly. And then long term, this is really an enabler to this 25 to 50 basis points of SG&A leverage, which is our long-term target. And that's relative to historically what we've done about 20 to 30 basis points.

Scott Kirkland: Yeah. Christophe said it very well, Vincent. The savings momentum is better than we expected, as you said, moving from that 225 to the 325 now by 2027. And it's that way as we're learning, but also moving up the value chain as we deploy technology and AI in these high-touch processes and then leveraging the global COEs that Christophe referenced before, which allows us to deploy that technology at scale. But I think as we think about 2026 to 2027, that incremental $200 million from what we've already realized, I would think about that pretty evenly. And then long term, this is really an enabler to this 25 to 50 basis points of SG&A leverage, which is our long-term target. And that's relative to historically what we've done about 20 to 30 basis points.

Christophe Beck: Thanks, Earl, about to acknowledge that question. Well, at Ecolab, we've been for a long time in the business of building great new businesses. Ecolab Digital, as we know, as you know, is a fairly new business that we started 2 years ago. It's not that we started digital technology and digital offerings to our customers 2 years ago. We just did it as part of our offering for 30 years when we invested in 3D TRASAR technology. We haven't monetized directly that offering to our customers for, okay, 28 years of the last 30 years that we've been in that field. So we're building that new organization. We created a dedicated organization on that opportunity. It is in the early years. It's not perfect. It's a bit rough on the edges at the beginning. But that's always been true when we build new businesses.

Christophe Beck: Thanks, Patrick, about to acknowledge that question. Well, at Ecolab, we've been for a long time in the business of building great new businesses. Ecolab Digital, as we know, as you know, is a fairly new business that we started 2 years ago. It's not that we started digital technology and digital offerings to our customers 2 years ago. We just did it as part of our offering for 30 years when we invested in 3D TRASAR technology. We haven't monetized directly that offering to our customers for, okay, 28 years of the last 30 years that we've been in that field. So we're building that new organization. We created a dedicated organization on that opportunity. It is in the early years. It's not perfect. It's a bit rough on the edges at the beginning. But that's always been true when we build new businesses.

Christophe Beck: But the fact that we are already generating close to $400 million of sales, which encompasses only two components of it, it's connected hardware and it's software. Those are the two elements that are driving those $400 million, a very high margin and growing, obviously, north of 20%. And I think we'll grow probably 25% in 2026 as well here. And we're really at the beginning of it. The way we think about digital sales at Ecolab, and especially in the future, is what we call the 100, 100, 100, where 100% of the customer locations that we serve will have to be connected. 100% of the applications that we provide to each of those locations think about a hotel where you have a dish machine, a laundry machine, an AC unit, pest elimination, EcoSure audit systems, and all that. Those are the applications.

Christophe Beck: 100% of them need to be connected. The third element is 100% of the time where people pay for it. So 100% of the units, 100% of the applications, 100% billable offering. This is the way we think about it. That's why when I think about the $400 million we have today, we have just scratched the surface of what we can do. We still have a lot of customers using those technologies that do not pay because they're still on the old programs. We have a lot of customers that do not use it today, especially in institutional because it's relatively new that the cost barrier is not the barrier anymore. So for most of our customers as well. We have millions of customers out there that can use it. That's why Ecolab Digital is a great story, very early in that development.

Christophe Beck: Thanks, David. It's a combination of both. That industry, so the paper and packaging industry, has had a dual challenge. On one hand, okay, a demand that was pretty low. And at the same time, related to it, consolidation of the industry. So consolidation means that they were closing paper mills. And a paper mill for us is a big chunk. So it can be up to $10 or 15 million of sales in one location. Well, if it happens that that location gets closed, okay, there's not much you can do because you're not going to sell much to that location anymore. So we had to go through that the last 12 to 24 months. And that seems to be behind us. We haven't seen, in our environment, mill closures in the last few months, which obviously is good news for us as we enter 2026.

Christophe Beck: New business is good in that business as well. Innovation is strong as well at the same time. The margin of that business was, what, 13% last year? So it's not Ecolab average, but it's still okay, if I may say. So the combination of both, kind of recovering progressively and pretty good margins even in a down environment in 2025 makes me a bit more optimistic for 2026. But I'm not even close to declaring victory on this one. Same for basic industries, different industries, obviously, but similar model as well. So we're dealing with it, making sure we make money in all of those businesses. We keep gaining share as well. As those industries recover, that's going to help us as well over the next few quarters.

Christophe Beck: So thank you, Shlomo. So a few questions, obviously, that you have in there. INS, institutional and specialty, basically nothing changed from a demand perspective. And if you normalize, it was 4% organics for INS and 3% for the institutional division and 7% for specialty. So generally, nothing to see in INS. In a market that's a difficult market, as you've probably noticed, so the restaurant, the hospitality industry is not doing great right now, but we're gaining a lot of share, which is really good. Maybe a comment on this distributor inventory. Why did they go down? And that's not under our control. It's obviously our customers deciding that. Well, the better we become in our supply chain service, the more reliable, the more accurate we become, well, the less inventory they need to carry from our products. We've seen that in the past a few times already.

Christophe Beck: That's the first part of the question. So I hope it answered your question, Jeff. And so now on Ovivo as a business, it's roughly $0.5 billion. Yes, it's a bit less than that. And it's growing double-digit. The way it looks for Q1 is double-digit growth as well. I've been very pleased with the new business in that field. It's focused 99% on fabs, as you know. And we've closed a few very interesting deals in Singapore and in the US. It's very few customers, as we know, that are producing some microelectronic chips. But those are very big every single time. There's no one that can do what Ovivo can do. And there's no one that can do what together we can do, which is this circular approach of using and recycling ultra-pure water.

Christophe Beck: 95% of the water does not get recycled in microelectronics today, which is a major issue. Our ambition, it's to get north of 80% recycled. So from 5% to 80% or in some cases, even 100% of reuse. Now to your question on equipment and consumables, Ovivo as such is mostly technology and much less consumable. What's important to us is the combination of Ecolab and Ovivo, which then becomes very much like an Ecolab business where it's mostly consumables and technology as a secondary growth driver. That's why we really like it. It was a technology that was really hard to develop. No one is even coming close to them, Jeff. We could have developed it ourselves. It would have taken years. The second issue is to get the credibility with those microelectronics manufacturers.

Christophe Beck: Yeah. So it's 35 customers. So it's our top 20 largest customers in the world and what we call our emerging 15. So those are not the biggest, but the ones having the potential to become some of our biggest, microelectronics being a perfect example of one of those 15. So you get to 35. That could drive $3.5 billion of share increase potential. That's why we focus on those ones first and foremost. It's simpler because it's fewer customers, and it's the biggest potential, the $3.5 billion, in many locations around the world. So we've gotten organized behind those 35 customers, which are the biggest brands, obviously, that you know in all industries as well at the same time. So that organization component has been done.

Christophe Beck: The growth of those 35, as mentioned before, so it's 2 percentage points higher than the rest of the company. Facts are demonstrating that it's working. It's probably the second biggest moat that we have as a company, our first being our team serving our customers everywhere around the world, is delivering best-in-class performance. Basically, we help each of those customers understand what's the best-in-class performance within their own company. If it's a restaurant, what's the best guest satisfaction? What's the best cost performance? What's the best environmental impact? If it's a data center, it's uptime, cost, and impact. You get the system here. We help them drive the performance of all the units towards the best-in-class performing unit within their company. We do the same across the industry, not sharing the names, obviously, to help our customers understand how far away from best-in-class performance.

Christophe Beck: The short answer is all three. Mike, so first two questions, penetration, it's in the low single digit today. So we're very early here. As mentioned, often, this is something we did not exactly do in our institutional markets because it was too expensive for our customers to embrace that technology. Things have changed dramatically in the last two years. And we have the knowledge and expertise from our water industrial businesses. So we kind of are very well positioned for that. So very early on that journey. Second question, where it comes from, in our reporting segments are our traditional four reported segments that we have, the digital sales that we mentioning are the digital sales of those four segments. So they included in the four segments, which is the way so we've presented it the last 12 or 13 months that we're doing that.

Christophe Beck: So just to be clear here, we're not trying to push back any margin target, 20% by 2027. That remains the same. We had 18% last year. We'll get north of 19% in 2026, and we'll get to 20% in 2027. And then we'll keep growing, so 100 to 150 basis points as we shared as well on investor day. And M&A needs to help getting there. We will never do an M&A deal that's destroying value for shareholders. So return on investment needs to be at the right level. It needs to be growth and margin accretive. Those are the plans. Afterwards, whether everything happens as planned, well, that's an execution question, obviously. But we are very disciplined in how we do M&A. We will never do something that's destroying value because what we say inside the company, that's buying work, and it's dumb for shareholders.

Scott Kirkland: Yeah. Hi, Josh. Yeah. On CapEx, as you know, our historical CapEx has been in this 5% to 6% range, and about half of that is equipment at customer locations, which is why this thing grows in proportion to sales. The 2026 CapEx came in at about 6.5% of sales, to your point, because we're investing in growth like the new business, but also the innovations around DishIQ, pest intelligence, Global High-Tech, and that will continue into 2027. I expect that the CapEx in or sorry, into 2026. I expect the CapEx for 2026 to be around 7% and probably for the next couple of years because we're continuing to invest in those growth engines, really to focus on accelerating sales and expand margins. So we're investing organically and inorganically, both to expand margins and drive sales.

Christophe Beck: The two questions here. So you're right. The 3 to 4, so it's where we are now, obviously, and so toward the upper range or more of the 3 to 4, driven by both, actually. So the normalization of the more challenged industries in paper and basic and our core and growth engine businesses that are doing extremely well. As we discussed before, our growth engines are growing double-digit today. And some of our core businesses, like institutional and specialty, so at 4, F&B at 5. So our core business and growth engines are doing really well at great margins and great margin development as well. So it's a combination of the two. And more specifically, the data center, which we don't exactly so disclose as such, but our Global High-Tech business is growing pretty strong double-digit sales.

Christophe Beck: The two questions here. So, you're right. The 3 to 4, so it's where we are now, obviously, and so toward the upper range or more of the 3 to 4, driven by both, actually. So the normalization of the more challenged industries in paper and basic and our core and growth engine businesses that are doing extremely well. As we discussed before, our growth engines are growing double-digit today. And some of our core businesses, like institutional and specialty, so at 4, F&B at 5. So our core business and growth engines are doing really well at great margins and great margin development as well. So it's a combination of the two. And more specifically, the data center, which we don't exactly so disclose as such, but our Global High-Tech business is growing pretty strong double-digit sales.

Christophe Beck: We will publish our exact numbers in Q1, by the way. So I want to make sure I'm not getting ahead of my skis here. But we will get more color in Q1. But it's one of our best businesses that we have here, very strong, strong margin, growing double-digit at strong rates. And Ovivo is going to help. And all the innovation I mentioned before on the cooling as a service is getting great reception, so from our customers that need it more than ever because chips get more powerful. They get more concentrated on a rack. They create more heat that requires more cooling. And if that doesn't happen, obviously, so the data center stops operating. So it's absolutely essential as a component of the compute offering here. So very good story and early on that story.

Christophe Beck: It's going to be a great story in 2026. We've been building that business for years, as you know. I always loved that opportunity. The first few years were more complicated than we were hoping, not because of internal questions, but the market. So it was a bit in a more challenging place after COVID. It helped us gain share, build further our business. And now we're collecting the fruits of what we've built in life science. And you've seen the growth acceleration. Bioprocessing, which is a core part of it, is doing extremely well in there, is really at the forefront of innovation for the biotech industry as well at the same time. So we're all going to really like the growth of that business starting in Q1, by the way, for life sciences. And our objective is to get to 30% margin.

Christophe Beck: That's why I really like what our Institutional is doing, has done over the last five years as well, shifting towards digital technology, all those IQ platforms that we talked about, Aqua IQ, for instance, which is a remote service for pools around the world. When you think about the work that's required, well, that's taken over by AI with that application. Those are game-changing innovations in that business that didn't exist five years ago. So institutionally in a very good place, Specialty that serves some more of the quick serve as part of this hospitality business, as you've heard, so growing very nicely. So at 7% very consistently with great margin as well. So I think that INS is in a very good shape. So I'll end where I started. The company is doing well, and I especially like the growth development we have in our core businesses.

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Q4 2025 Ecolab Inc Earnings Call

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Q4 2025 Ecolab Inc Earnings Call

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