Dover Corporation

Stand by, your program is about to begin. Good morning and welcome to the Dover's second quarter 2022 earnings conference call. Speaking today are Rich Dobin, President and Chief Executive Officer, Brad Seropak, Senior Vice President and Chief Financial Officer, and Jack Thicken, Senior Director of Investor Relations. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. As a reminder, ladies and gentlemen, this conference call is being recorded and your participation implies consent to recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you. And I would now like to turn the call over to Mr. Jack Dickens. Please go ahead, sir.

Thank you, Emma. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through August 11th. The replay link of the webcast will be archived for three months. DOBR provides non-GAAP information. Reconciliations between GAAP and adjusted measures are included in our investor supplement and presentation materials, which are available on our website. Our comments today will include forward-looking statements based on current expectations. Actual results and events could differ from those statements due to a number of risks and uncertainties which are discussed in our SEC filings. We assume no obligation to update our forward-looking statements. With that, I will turn the call over to Rich. Thanks, Jack.

Good morning, everybody. Let's start with the performance highlights on slide three. Our team delivered a strong second quarter performance which led to record quarterly revenue and sequential year-over-year earnings growth. Consolidated organic revenue growth to 7% in the quarter as our businesses continue to capitalize on strong backlogs and pricing actions continue to take hold. We believe our ability to execute and provide needed capacity in today's challenging environment has led to noteworthy share gains in multiple markets, which is positive for our continued growth. Component shortages and COVID lockdowns in China did negatively impact shipment volumes and consequently efficiency and fixed cost absorption. In several businesses during the period, despite these difficulties, as well as FX headwinds, our absolute segment profit increased year over year, and operating margin improved sequentially in the quarter, driven by cost controls, good volume, and meaningfully improving price-cost dynamics. Our strong balance sheet provides flexibility for value-creating capital allocation initiatives. We are investing in capacity expansions and productivity improvements across many of our operating companies to capitalize on secular revenue growth opportunities, capture market share, and drive improvements in operational performance. The recently announced Malema acquisition will enhance our biopharma business on July 1st, and we continue our pursuit of attractive bolt-on acquisitions. We also repurchased 85 million worth of shares in the second quarter, and we'll continue to proactively evaluate capital deployment alternatives through the remainder of the year. Our strong backlog, constructive demand outlook, An execution playbook position as well to deliver growth in revenue and earnings amidst an increasingly uncertain macroeconomic backdrop. We are maintaining our 2022 adjusted full year guidance of $8.45 to $8.65 per share. I'll skip slide four, which shows the detailed quarterly results. Let's move on to slide five to discuss segment performance. Engineered products revenue was up 19% organically in the quarter on broad-based strength across the portfolio and major geographies, as well as pricing actions. Margins were up 130 basis points sequentially, and we expect the trend to continue through the second half as price-cost spread continues to roll forward. Clean energy and fueling volumes were driven by strength in clean energy components, vehicle wash, and below-ground fueling components offset by the expected roll-off of EMV related to land in North America, which peaked in the comparable quarter last year. Margins in the quarter were down year-over-year on lower volumes and constrained inputs, and to a certain extent mixed. The sequential margin improvement was significant, however, at 410 basis points versus last quarter, driven by improving cost dynamics and product mix. In imaging ID, our volumes in our core marketing coding business were constrained by electronics and other input shortages, as well as COVID lockdowns in China. It's offset growth in our serialization of brand management software businesses. FX is a material negative headwind to absolute revenue profits in the segment, given its large base of international revenue. Q2 margins in imaging ID were impacted by lower volumes in production stoppages in Asia, but improved sequentially. The team has done a good job in cost containment and finding alternative suppliers to alleviate supply chain constraints, and we are confident about good margin conversion in the second half. Pumps and process solutions posted a 7% organic growth, strong double digit growth in our core non-COVID biopharma business, as well as robust growth in medical and thermal connectors, industrial pumps, polymer processing, and precision components. Operating margin in the quarter remained robust at 31%, plus despite a mixed shift towards industrial components. Top line in alignment and sustainability, technologies continue to be strong, posting 11% organic growth on solid volume in heat exchangers and beverage can making, as well as pricing across all businesses. Volumes in food and retail increased. were constrained by supply chain challenges which negatively impact cost efficiency and will result in shipments pushing out into Q4. Comparable and sequential margins were up in the quarter on better mix and price cost, though partially offset by production efficiencies and input shortages. As you can see, we're marching towards our mid-teens operating margin target in this segment. I'll pass it on to Brad here.