Dover Corporation

Good morning and welcome to Dover's fourth quarter and full year 2023 earnings conference call. Speaking today are Richard J. Tobin, President and Chief Executive Officer, Brad Serapak, Senior Vice President and Chief Financial Officer, and Jack Dickens, Senior Director, 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 and then the number one on your telephone keypad. If you would like to withdraw your question, please press star 2. As a reminder, ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Mr. Jack Dickens. Please go ahead, sir.

Thank you, Angela. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through February 22nd, and a replay link of the webcast will be archived for 90 days. Our comments today will include forward-looking statements based on current expectations. 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. Let's start with the key messages on slide three. Market demand conditions in the fourth quarter played out largely as we expected, and as we discussed at the end of Q3, we adopted a business posture focused on managing down production in certain product lines to balance channel inventories to the detriment of fixed cost absorption. This puts us in a good inventory position and enable us to match demand and production in 2024. This operating posture also drove solid operating free cash flow performance in the quarter, which positions us to play offense on the capital deployment front in 2024. We capitalized on strong volumes in several markets and drove margin mix higher for the consolidated portfolio in the quarter. The breadth and diversity of our end market exposures, along with proactive cost containment and pricing discipline, led to another record high quarterly segment margin in Q4. We remained active on the portfolio front. We improved our portfolio through synergistic bolt-on acquisitions, including two transactions announced in January that add attractive reoccurring and software revenue streams good growth exposures to our mix. We expect to close the Dosteco sale by the end of the first quarter, which will further enhance our cash position. We entered 2024 in a significantly better financial position than we were 12 months ago. Underlying demand across the majority of the portfolio is solid. Bookings momentum is improving, and we drove the first organic bookings growth in eight quarters. Of note, BioPharm, but booked a bill, was above one, signifying an improving sentiment in the market, which is also evident in recently announced results of some customers and channel partners. While we expect seasonality and idiosyncratic headwinds, such as European heat pumps and can-making equipment to weigh on volumes in the first half, overall, we expect demand conditions to progressively improve off their fourth quarter exit rate through the year. Our recent investments puts us in a very strong position to capture secular growth across numerous end markets like CO2 refrigeration, bioprocessing, data center cooling, electrification of heating and cooling, and smart compressor controls. In-flight cost actions provide carryover benefits in 2024 with specific projects to be announced during the year. Lastly, our balance sheet has ample capacity to execute against a strong acquisition pipeline and pursue opportunistic capital return strategies as we continue to upgrade the portfolio over time. Let's go to slide four. Consolidated organic revenue is down 3% in the quarter. Bookings were up 2% organically, reflecting growing order rate momentum across much of the portfolio. Segment margin was up 100 basis points to 22% on broad-based productivity and portfolio improvements. Free cash flow in the quarter was over $450 million or 22% of revenue on improved working capital efficiency and lower capex. Adjusted EPS is up 13% to $2.45 per share in the quarter. Our guide for 2024 reflects a constructive outlook. We are guiding for organic revenue growth of 1% to 3% and adjusted EPS of $8.95 to $9.15 per share. which represents a 5% to 7% year-over-year organic growth excluding the tax reorganization benefit recognized in the fourth. Let's skip to slide five. Engineered products at a solid quarter driven particularly strong volume growth and conversion in waste handling. Chassis availability improved through the quarter and the business has reservations from large national waste haulers and municipalities well into 2024. Europe and Asia shipments were notably lower in vehicle aftermarket, but bookings improved during the quarter. Margin performance improved 270 basis points on positive mixed benefits and volume conversion on recent productivity investments in the waste hauling business, coupled with a solid performance in aerospace and defense. Clean energy and fueling is our most distribution-leveraged segment, and as such, is where we intervened aggressively on production to facilitate general channel destocking in below-ground retail fueling, hanging hardware, LPG components, and car wash in the quarter. Cryogenic components continued their robust growth, and above-ground fueling equipment was up on continued recovery in U.S. dispensers. We believe that our proactive intervention on production in Q4 has allowed excess channel inventory to clear and we expect in this segment to return to normal booking and shipping posture in 2024 with normal seasonality levered to quarters two and three. Imaging and ID posted another as projected stable quarter against a difficult comparable period with a high degree of reoccurring revenue and market and geographic diversity. In exposes to growing regulatory requirements for product ID and traceability, this segment remains a consistent performer with strong margins and cash flows. Margin performance in the quarter was exemplary. Pumps and process solutions was up organically in the quarter on strong shipments in polymer processing and precision components. The integration of FW Murphy is off to a strong start with a good reception from our customers and notable recent wins substantial reoccurring revenue contracts in remote monitoring and smart compressor technology. Top line performance in climate and sustainability technologies was impacted by expected volume declines in beverage can making and as well as the recent and abrupt industry slowing in the broader HVAC complex in Europe and Asia, most notably in residential heat pumps demand, the degree of which was not incorporated in our previous forecast. Margin performance was exceptional in the quarter, driven by improvement in food retail, which posted EBIT margins in excess of 15% in the fourth quarter, traditionally a seasonally slower quarter, on positive CO2 product mix and productivity. The food retail team deserves commendation for their operational achievements to drive significant margin accretion in these past few years, but we still have further runway to improve, largely on improved product mix. I'll pass it on to Brad here.