Vontier (VNT) 2 Nov 232023 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Vontier Third Quarter 2023 Earnings Call. [Operator Instructions]. This call is being recorded on Thursday, November 2, 2023. And a replay will be made available shortly after. I would now like to turn the conference over to Ryan Edelman, Vontier's Vice President of Investor Relations. ahead. go Please

Morelli, operator. and joining you, discuss everyone, thank our are and third Officer; Chief Great. Anshooman Financial and on Good Officer. the for Aga, Mark today me us results. Vice to President call you and quarter Executive President Thank Senior With morning, our Chief this our morning

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

forward-looking results forward-looking forward-looking within regarding these will that, our are laws, them. today, anticipate in filings. With developments statements that I'd may that to and risks make any to obligation we also our will results call subject Mark. Federal turn events we the website do like actual over update that meaning or differ any securities may We make differ to not statements or statements available the these SEC regarding on materially Actual statements from These factors statements assume uncertainties. the is to occur or of might in expect including and materially future. Information and we to cause forward-looking from the

good top year-to-date dedication incredibly our portfolio. driving our world core performance recognize We're QX, of again quarter baseline growth to connected demonstrating mobility customers, of some the X. operational Vontier the delivered for our highlights second ahead this execution, a their employees XX%. our of take strong our strength with and for and joining quarter, for system. We Quarter to around with business start growth want on the reflects expectations the and of us revenue line power with Thank Slide accelerating of which delivering Ryan, morning, Thanks, the you to continued I on performance Third of everyone. I'll to strategy discuss differentiated progress results. our pleased beginning in the

the sales As a also The next reminder, headwind in baseline growth fourth in quarter Fueling reported our business, core this growth double-digit Mobility low DRB the Fueling beginning which up the all Mobility from XX%, of by year. alternative finally the and double-digit dispenser solutions & has & Environmental digits the we benefit and Technologies Both Invenco quarter. to excludes marks peak low over and our and baseline from Within business of U.S. Lexicon our comparison EMV Tech, year-over-year grew low continues EMV energy in also to comparison. impact forward robust been look demand double consistent up baseline. removing the GVR Environmental with the end year.

of strong Our footprint. in puts position their leading share in large and operators a fueling to regional expanding on us modernizing or reinvestment capitalize and with C-store national strength their store

of of enjoying Year-to-date, as equipment build activity are car fuel new customers higher balance trend many underground as benefits strength continued forecourt, this demand. equipment growth exceeded site in-store margins, including our has sales healthy our coupled broader and strong wash. in driving across and rebuild retail c-store, with well reinvestment portfolio, cut activity Our expectations fueling The parts refresh and sheets.

our dynamics, quarter, wage industry-leading strong visibility benefiting employment growth. Looking project vitality. delivered supported confident including result from given this of also this ahead, technician will product we and We're continue this Solutions strong and is X% healthy by product are strong our growth pipelines. Repair a into a market lineup, customer end

majority and mobility constructive anticipating. in automation. what versus across continued deliver was enhanced solutions the Our in Demand connected businesses book-to-bill elevated remain $X.XX of at stable remain supported the backlogs and remains ecosystem that QX historical investment healthy, across and levels. ratio seen with our our we relatively consistent with the productivity in year-to-date we've trends are Leading line indicators by

survey a of NACS, conducted channel flat been we encouraging. Recently, are conjunction in This we to show Additionally, with XX% reflects XXXX. us of our retailers that have higher more the as our projecting underlying Convenience their of net National gives checks customer a CapEx expect end profits percentage would confidence Stores. and Association spend which for outlook. in resiliency markets in these the

operating Excluding basis the of XX the operational execution. year-over-year EMV to expanded margin through VBS deliver power demonstrating compare points, rigorous excellence baseline

We're several in which QX, range, the the next Based early our top initiatives year. opportunity the line in year, of of explain our high ample core, in savings from few full the our to optimize the provides XXX-plus towards we're of half earlier expand part our and in strategy, which, guide, detail with more the XXXX. are results achieving the we previous in as we tracking in Anshooman of target target restructuring of actions Additionally, of by end strong over our EPS basis full the in generated innings above for now year our the years, savings pillar optimization still adjusted moving margins million incremental will taken $XX a on self-help one points minutes. updating

strategy. our continue transition Let's with grow turn to a road first of refueling state-of-the-art station fleet decarbonizing vehicles. in hydrogen Last evolution next the the as operators month, This Slide map to mobility offerings. to in to is connected our technology solution that kind, their turnkey we zero-emission the its station. and our unveiled for orders enables scale examples hydrogen of modular we X accelerate first they Demonstrating general, rollout for and product of how our of continued we're couple executing fleets the to a mobility our commitments stations

our provided fleet with the them Trillium company, more natural XX gas leveraging having partnership than compressed long-standing refueling. are Love's We for stations

transition to to to transition to of their Clarita fuel well zero-emission a With going includes the compression solution dispensing is Santa bus software. hydrogen connectivity our in configurable deliver cloud-based This cell fleet them, best-in-class system ensures we California as hydrogen order and buses. Cloud of X station. our technology of technicians. fueling of Santa in announced billion uptime $X.X service first commitment preventative Clarita to maintenance uniquely the hydrogen Transit through This hydrogen as hubs further integrated support Energy's and of billion Department infrastructure regional network Federal California back bipartisan performance of by X as law. monitoring the the Transit plan of U.S. remote supported funding further is the and State extensive by under $X

across state XXX targeting XXXX. is stations California the hydrogen by

and in alternative benefit positions is from Our of infrastructure. world. in the gas a but hydrogen leadership early compressed design not state the for substation of well build-out only which and leverages all the This growth. This is stages, to still of business build-out us clean California, in solutions elsewhere parts natural we the see and U.S. production, energy our the opportunity in multiyear

Invenco right-hand unit our NACS we are the the to the integrate show October. first side the trade terminal in On excited at you launch to of have the dispenser of show that chart, we commercial payment announced early

As synergy the Invenco related payment you year our may with last of to dispensers. own integrating opportunity recall, part technology vertically acquisition our the into

of Now ongoing in-store year-end. is end-to-end we payment card updates It payment protection on retail uptime. latest capable product first upon just maximizing deliver end a we the cloud-enabled cyber systems plant Through over customizable payment We've PCI and X energy XX% flexible as of deployed management. the payment. significant platform of lineup road is extremely changes and also both industry's map October, Shell's security user The meet sites our iNFX our maximizing regulatory and our significant is It integration with managed going Flex the delivery on of seen offers core and standard delivery Invenco-deal connected leading solution are and cloud the into our to asset tackles and orders month. The of convenience to their Chevron the energy rollout engagement already milestone is X industry XX,XXX by and Shell workflow Flex enhanced or sites pace thesis. experiences XX% to reach for of in for with well. to over-the-air expands a solution the transaction Pay compliant Pay pump, system consumer the X at the

about of illustrating a the reminder, cover X these equates sites offering. over in first of differentiation C-stores U.S. combined, to XX% which As the this wins XX,XXX all

iNFX pipeline our to continues the interest globally. commercial ecosystem major mobility build with for from customers high levels of across the Additionally,

continue themes that meet in of financial Vontier mobility. us enabling year-to-date. underpinning unparalleled We important for the moves, our greater on the the to key of need shape all the the to most opportunity capitalize world the performance more not see strong across but the future couldn't is an secular only and to demands customer The ecosystem. mobility for technologies wins and these be lead today way for is trilemma. evident address continued need and automation of We and the and the energy multi-energy trends productivity

details Now performance I'd the the the to call over an like of year. through for turn to the our our remainder you to outlook on financial and update of Anshooman provide take

and turn quarter approximately reported prior X. third Thanks, down Please for was both the to quarter on Slide revenue year morning, with a and core million, Mark, our everyone. third performance. I'll basis. a summary of good X% the start Reported $XXX from

impact the sunset. of the versus profit down operating growth expected EMV, prior to adjusted from the $XXX Total headwind year XX%. was Excluding due core baseline million, approximately the was EMV

higher Baseline productivity free $XXX $X.XX margin reduction of $XX QX expanded was restructuring year-to-date. and high savings in XX% earnings over supported XX.X% up as prior of by was improved margin improvements by price as cash our representing range, in third of million, Adjusted by million was the continued higher and the XX supported guidance guidance basis profitability. continued a and from operating profit above including XXX% cost our led share inventory Adjusted flow per ahead capital, revenue performance. Adjusted end well working points, quarter the range. for conversion year of

quarter the and fourth between the second and on ramp Given strong our worked to the third fourth call, teams guidance through quarter. diligently our third profile provided rebalance the the we half last and derisk the financial proactively quarter

and for were of as price supply continuation able and industry-leading by conditions. further and our This a restructuring for solid results strong operational the Our updated savings to normalizing QX was this QX outlook supported chain of deliver on are costs. solutions execution demand in on and success capitalize reflection we

performance sales the Technologies for the across XX%. our X% growth solution continues share business gain our remains board. carwash solid double-digit business over solutions tunnel Turning our starting low was the Core Slide this top core baseline of as for to growth and demand increased Mobility was segment X% growth segment DRB, healthy. with to posted quarter core and line carwash X. performance, on

to its for since record growth point-of-sale has one-tier as joining a for building is tunnel by well a business transformational this the DRB been who carwash well core operational platform growth believe base is on analytic Patheon. revenue cloud-based insights. above-market and are on will Customer benefiting software recent customer membership software, and the impressive we designed XXXX. point-of-sale control has want adoption track an customers' a directly be as of data efficiency applications of fueled feedback and had demand Patheon focused their This investment. and maximize our through and strong and positioned positive, into market loyal operators growth portfolio, data-driven very launch the growth for systems return

a continues driven refueling Our of the demand solid Invenco as and over hydrogen equipment up dispensers. for quarter. by gas natural well alternative solutions had shipments to strong business as outperform third by sales energy systems initial GVR with compressed also XX%,

of deployment ongoing X,XXX over the our Portugal-based ahead we platform, an schedule, deploy is its of agreement network to with Passport of Energia addition announced iNFX point-of-sale stations across to system service Galp running our also which Iberia. In in X

software cloud-based purpose convenience and fuel for platform, modern a represents X retailers. built Passport

business also constraints. head labor to In address back cybersecurity proud with of of help synergies contactless sale, ahead We're and Galp to contributions profit as was with QX in as the It improved offers addition and office management programs. purchase from portfolio. to XX%, workflow Invenco strong and the $XX advanced an point operating supported gain. continue tracking personalized omnichannel mid-teens reduce the in office this offering. Segment increased transaction expectations, solutions also and loyalty further by automation over well retailers base as at performance given it profitability anticipated, our protection site and to as accelerated incorporates complexity and across partner integrated DRB experiences, from the customer Invenco ongoing we ramp million options margins and including now FX on

demand continues Matco Turning environment auto a at Repair as revenues well to to power X. over Slide in high tool from growth strong continued benefit Solutions strength demand lineup. wage levels. XX% Matco increased led X%, on tools and storage growth technician in by our as remains repair as employment,

anticipated. environment of key capitalized product communicated. was steady times up XXXX, versus on to while in favorable settlement improved new have the cadence year-over-year down prior Operating third year-to-date, product we sequentially, a quarter lead the year receivables this of profit, portfolio categories have launches. reserve several As Due and tariff related the as adjustments recorded as a to we previously in with

year, close profit we as declined finally, margin EMV impact at to still XX, the the Matco's Solutions. improve Fueling & sunset. in year-over-year ease. And out revenues the As operating we of comparisons on to EFS expect Slide Environmental Reported XX% due QX

strong our for continued impact, demand led environmental this XX% core baseline well sales as dispenser strength in by Excluding as growth equipment. was U.S. business

our which expansion year-to-date margin expanded segment in continued As to has strong cost. and tight dispenser primarily EFS business. and profit driven has on tied CapEx refresh XX points healthy led of the trends from demand by successful especially to the execution Mark performance U.S. EFS actions basis restructuring activity, operating referenced, benefited industry price

to cash XX. as third in our to which cover income adjusted well Turning XXX% $XX Year-to-date, the in cash details and us at typically with year in Slide million. third of our had we quarter. another just generated maturity conversion We reducing strong of full XXXX of target free with conversion. performance repaid $XXX over sales. net cash XX% QX, within sheet over for on XXX% a strong million million $XXX flow putting we further seasonally XX%, delivers and balance the conversion We quarter generation the our debt quarter, reach enter quarter I'll

We completed bringing in $XX million our repurchase million. $XX also repurchases share total year-to-date to

adjusted over year conversion equates to flow our million. maintaining are to free $XXX full for We XXX%, XX% outlook cash of which

with the Slide our the starting year. guidance for full Turning outlook to XX, assumptions on updated

of single-digit year-to-date, $X.XXX now a our versus to includes the line an our revenues This billion. million anticipate top Given progress $X.XXX in guidance. total on headwind in we FX sales range previous implies the core low decline which $XX approximate billion from

Mark As change for related is our EMV noted to to earlier, the assumptions the sunset. there no headwind

will comparison a we and fourth in quarter, and reminder, headwind then this finally the peaks this next on beginning sequentially in As QX issue move year. ramped of from

range fourth $XXX to with range $X.XX million guidance million. for a our We $X.XX the narrowing the EPS adjusted adjusted are our in to to $X.XX. The implied to top is $X.XX revenues of end of $XXX quarter prior EPS range to

a embedded We peak the $XX will mentioned, year. prior the the following Mark. just into which provided. With of a prior late over changes recovery are I in and which one normalizing planning call a have supplier assumptions slide in approximately for last chain core that, is revenue our is other comparison includes from tougher as top line year, a FX initial QX, The to the turn the the basis and line I and full to EMV back shipments, was a in up shutdown as material the QX in benefits XX% call-out, I No on included supply appendix. to our relative will guidance million that is headwind top outlook year

Vontier Thanks, and significant aligning transforming double-digit flow. top line deliver and portfolio Anshooman. sustainable to growth, earnings our growth industry-leading free is cash profitability

and automation, ecosystem. a by need broad technologies the and with continue and address productivity market in trilemma affordable the sustainable, secular the positions tailwinds Our and We're differentiated robust multi-energy connected secure to facing The propelled positioned deliver mobility leading mobility energy portfolio sweeping wins strategy for world. to our with ideally energy.

are evolving for preferences robust employees, for technological problems leading-edge consumer solving requirements, are future the line pipeline our moves, we our world. With points open EV solutions platforms and of car we're growing opportunities. Through to and positioned sustainable segments, interoperability the enabling the customers, operator, and shareholders including of across the customer ready questions. unmatched for our high-value all we're the uptime. Across mobility vision, and a challenges, touch driving and safe, and regulatory networks software ecosystem, clear washes, labor smart, network differentiated that, increasing way for growth Our c-stores, fleets with capabilities world

[Operator Instructions].

from Your first comes Mitchell from question Julian Barclays.

] Matthew Mitchell. [ is for Pan on Julie This

Just one question.

of there you're could Is that for above tracking target. size incremental million any mentioned savings savings spillover You you XXXX? the of $XX

Yes.

$XX year. closer the slightly incremental tracking to then And million we're million. $XX $XX goes So to so full to above synergies million, to million, the $XX next is going about into $XX piece million the year be

margins Vontier? or color saw pretty give a for is there QX. segment just total mobility good for Is And just for segments Perfect. that some could any follow-up. typical The And the you QX seasonality? in then

Yes.

So Technologies. little mix, profitability helped bit a had Mobility for Invenco also sequentially. a by up the were QX but ramping was strong quarter They been

when in all-in digits digits acquired remember, Invenco, were a quarter. you in to we low were the profitability they including single stand-alone they on synergies breakeven increased then actually and high this their single over and basis If XX%. were They mid-teens

that some continues. So obviously benefit of

transaction We the itself also third onetime transaction obviously fourth in had in which quarter, doesn't a gain repeat FX quarter. the

margins points So about to sequentially up but Mobility last XX QX be down basis expect materially fiscal for year. from Technologies

comes next Bank from Your of Andrew question Obin from America.

Ridley-Lane Andrew This on David Obin. is for

impact sales, customers' CapEx-related the you more projects to rates? on higher your interest seen fund given willingness For any have

play And have quite rates and is the see One is this pretty tell the we leading our diligent into areas year. next good that a on backdrop healthy I indicators We in as get Mark. we're trying out, increase far. might so look how David, on Yes, good sense particularly of watching obviously a you all that can to interest that

in-sourced from benefit the fuel a within folks us biggest for as areas of margins of that stores. as well convenience One get sales lot is

higher activity car the even though continued wash, interest with has M&A slowed see rates. also We certainly ROIs on good

good think XXXX a our setup setup. I is for so And

of areas product other as strength about with high the destocking, internationally business, based lineup One may in distribution in saw industry. our interesting quarter. have but able been our There's destocking some to single-digit you environmental that see pretty and is that's offset on the talked recognized growth that certainly our been we've the been also strength. We

think that also great have And So returns -- got products. the a It really of money pretty is folks spend. we've for we've we lineup I have to outstanding. outstanding fact that

than at more sort you to market we're of ever we lot new look If history offering have. products our here, a

great quadrupled going we've In a think And fact, really our XXXX. into product got lineup we've new introductions. I

as a mean you getting get in follow-up. do of you growth are? and to DRB rates kind the of getting that then lift I And upgrade another much DRB -- way, how sustainable quick rates these said I double-digit you're there? the are growth cycle think how natural the in Patheon from guess revenue that you growth

we've the in So some line industry. recognized

more recent spend they you car bit happened we We As car conversation they're It's grew And -- double is that washes. see well. know, out out the that than the a that been with thing really there's building We customer coming the as more XX%. that is digits. had through building that interesting XXXX industry in about What's tremendous a XXX a down dialogue than now washes. essentially had a in build-out. infrastructure, their

really through getting carwash and is And to market. which a been throughput it. enabling more to a Patheon building them. sweating where investment drops be the operational with good more meaning really which XXXX has through making and up, on targeted the for been assets It bottom effective new operators answer line, their excellence, to is return offering they've specifically is more more about a really efficiencies, focused operational year on

that anticipate I market so XXXX, we that, further as And into a here. for the dynamics leader heading growth think us market well positions and

when then you In quick solutions, reserve of lap and it. in just the do And quarter? quantify missed have kind numbers the Got question. the the year-over-year you impact may it. adjustments I related one repair did

the be an in to of QX. first quarter headwind or The tariff compare for year-on-year QX adjustments That part decline million the drivers reserve to up in the QX the in -- and really in QX. the basis up reserve-related those points $X.X for in is year-on-year fourth easier question, decline are XXX whole between actually X a Taking actually the closer adjustments Matco's about ended QX. were going margins materially your the was settlement. year-on-year

Instructions]. [Operator

Rob from Baird. comes question Mason next Your from

that. I half thought you joined not out Any inferred -- of we quarter? the call bit. the you entirely, that third a actually may saw little the talked due in to particular so to third upside I areas caught that a added the second quarter about I fourth I that some little have late, derisking strength or saw was would this quarter that but related

half well. in start QX strong Anshooman So setup me you Yes, let for in ramp jump let I'll in think have had what we seen I also -- as the this and QX. off may a our really second

also And customers out and so side, to up some the but convenience we of do wash able some are essentially our freed a the that store both store from for on not the and too. supply with convenience only of dispensers, what car chain bit availability product build labor, build-out

gave us still that if full will, QX. QX -- year, de-risk which ability really raising but we're us to QX demand to an enabled it So the you QX, into pull,

have a construction Technology fueling we demand in both of continued Also some upside above there. schedules, still Technologies car we on lot both some wash and saw move, greenfields supply in the were projects We fueling project some and as on the eased to chains Mobility our as side. customer the then their these schedules their have below demand that there's to and of -- on with pull side Mobilities saw for construction ground and out as side, able

the the the derisking results of second for with the we're year quarter. half strong with and overall, So very pleased

it really setup might good add, us gives I XXXX. a for

healthy demand product We've feel great here. got there's we think lineup. a like I some

cost too balance here. out our think price I of is not

as well. feel inventory we think I So bringing we're in down like position, a good

year. we entering feel optimistic So new the

the dispenser you're kind cetera. monitoring probably refreshes, How that there's the as around I in how of and visibility forward about impact the would higher permitting guess, particular, well. how time the Understood. and involved, thinking think the that rates of the activity? out Mark, business, given that, have all yes, around commentary And of referenced on et site previously builds, do rebrands new into question. just far much I visibility all you just that's the good some lead just

Yes. in Well, market, spot. where lead this strong. first national of large all, our is really really we the with players -- the We're sweet players we're leading in are the positioned regional

we have so And very regular conversations with them.

As to you fuel well a of balance can work have been have from margins imagine, they outstanding lot They going cash sheet. as are their put as sales to making up. on in-store

And continue footprints. a out and they're to build successful business models their so they very

is arrange visibility the look you do these don't next can a you approval, so into things year, you imagine, don't as And site they well out.

our right than In locations. cases, out supply but we buying certainly is go some and and continues And feel their sure the our even good to this a making really on our they're where visibility chains to very more they're where we and eased, them, position of And have too, building buying. year base working is activity many setup. location important forward. The about on

the prior resilient that has to to we going footprint what's happen in But been macroeconomic downturns. it's this -- environment. pretty also say Now in the hard have

timing from you as think the hydrogen how turnkey look and the And maybe around a just of of you that terms business as of a area, I'm also alternative the that mix curious we dispenser in over well quarter, influence about solution highlighted. the ramp? total side question Just versus of the would last perhaps should this more but a CNG just that strength was noted think aspect how fueling time

can you renewable it's today. just gas gas, offerings. launching as natural So mostly, hydrogen We're compressed natural imagine,

based early also need on I on is for side, ability our folks into us products provide that and to space market reliability They've this. think address this view offering for pretty safety asking challenges high that leading turnkey to a natural we on are high the the with regulatory to while, also been gas. reliability pull it's that this a compressed our innovative. solution and but similar dispenser very based solution on as And this focuses

spot. our really it's in sweet So

we about It's behind feel not funding of pretty good support. also So in bipartisan internationally. next It's a this year, going government just the that U.S. lot into

look about. to to theme there about just some electrification, seems lead. talk interesting, there's our not renewable legs we be we're And legs. of hydrogen, to energy certainly, they to think folks trilemma a really here quite but gas the we sustainability this means business, and well lot at very positioned also the It's So when should think natural

going in quarter, more So more hydrogen we're been to as optimistic into It's that growth see outstanding pretty you're doing a year. been of and than next over growth we the on get the as it's XX% the year last well.

this time. Mr. Edelman, questions there are at further no

may You proceed.

excited having about our us and portfolio that transformation. progress ongoing I'm execution for made Well, we've joining today's on setup for our XXXX. super operational outlook, significant I'm we're performance. call. thanks, And excited on our everybody, And

reading well. that's I as through think

seeing we day. many So of look a great Have forward the and road. meeting you to on

today. thank that We please you you ask concludes lines. call for your Ladies your disconnect and for Thank participating and gentlemen, conference this you.