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spk09: Good morning and welcome to Dover's third quarter 2024 earnings conference call. Speaking today are Richard J. Tobin, President and Chief Executive Officer, Brad Serapak, Senior Vice President and Chief Financial Officer, 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, please press star and then the number one on your telephone keypad. If you would like to withdraw your question, please press star and the number two. As a reminder, ladies and gentlemen, this conference 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 and I would now like to turn the call over to Mr. Jack Dickens. Please go ahead, sir.
spk04: Thank you, Connie. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through November 14th and a replay link of the webcast will be archived for 90 days. Our presentation today is on a continuing operations basis to exclude the impact of our divested waste hauling equipment business from historical results. Please reference the 8K filed on October 10th for further information. 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. And with that, I will turn the call over to Rich.
spk15: Thanks, Jack. Good morning, everyone. Let's start with the performance highlights on page three. Overall, the quarter was modestly better than our internal forecast, which we'll all cover in the upcoming segment. In the segment results slides, top-line performance was broad-based across the portfolio. We are especially pleased that the rotation from our longer cycle businesses to our growth platforms has continued to drive positive margin mix for the total portfolio. We expect that to be an underlying theme as we head into 2025. Segment margin performance for the quarter was solid at .6% and represents an all-time high for Dover's consolidated portfolio. Bookings were up 5% organically in the quarter with particular strength in clean energy, thermal connectors, CO2 systems and biopharma components, further bolstering our positive mix outlook. Adjusted EPS from continued operations was up 6% to $2.27 per share. During the quarter, we completed the divestiture of our environmental solutions group business, reducing our exposure to the capital goods sector. As you can see in the bottom right of the slide, the reconciliation of this impact to our full year adjusted EPS guidance from continuing operations. As a result of this transaction, we will exit 2024 with record capital deployment, firepower, providing us with a variety of value creation opportunities going forward. Our outlook remains constructive for the balance of the year. Our third quarter performance has given us room to manage demand seasonality to drive cash flow optimization through year end by thoughtfully managing capacity utilization. Our setup for 2025 is compelling with positive portfolio rotation into higher margin businesses as we lap easy long cycle comps through the year. This is further augmented by our exceptional balance sheet optionality to pursue value creating capital deployment strategies. Let's skip to slide five on segment performance. Engineered products posted strong top line performance on volume growth and vehicle services in industrial winches, aerospace and defense was lower due to shipment timing and a difficult comparable quarter. Margin was down modestly because of margin mix on reduced aerospace and defense volumes. Clean energy and fueling was down 1% organic as positive performance in clean energy components and North American retail fueling was offset by lower volumes in vehicle wash and retail equipment in Europe and Asia. Bookings were positive in the quarter as below ground retail fueling volumes are inflecting positively along with cryogenic components. Margin was flat as favorable product mix was offset by near term integration costs of our most recent acquisitions. We expect this dynamic to have a material positive margin swing as we complete our integration activities through 2025. Imaging and identification posted an excellent quarter on solid marketing and coding performance in the US and Europe. New printer shipments inflected positively during the quarter which is a good signal for customer capital spending. Margin performance was robust as management actions on cost to serve and footprint optimization continued to drive incremental margins. Pumps and process solutions was up 2% organically on robust shipments and thermal connectors, precision components, biopharma connectors and pumps. Biopharma revenue is up mid teens year to date and over 30% versus the comparable quarter of the prior year. As forecasted, polymer processing equipment was down in the period all in. Pumps and process solutions segment bookings were up 15% organically in the quarter as biopharma growth platform cycles inflected positively. Segment revenue mix drove 200 basis points of margin improvement on excellent production performance on volume growth and biopharma and thermal. Margin mix from the FW Murphy acquisition and tight cost controls in the polymers business. Revenue was down in the quarter in climate and sustainability technologies as solid demand and food retail systems was offset by tough comps in beverage can making equipment and weak demand in the broader HVAC complex particularly in European residential heat pumps on our braised plate heat exchanger business. We had hoped to see positive bookings inflection and heat exchangers in the quarter but that was not the case so we have taken down our forecast in the back half of the year in that business to preserve production performance for 2025. It's a frustrating result as we were able to hold segment margins flat despite the lower volumes due to excellent performance in our retail refrigeration business that was augmented by exceptionally good shipment rates in CO2 systems. Despite the short term challenges we like the set up going into 2025 based on increasing supply and demand where we expect bookings to inflect materially higher together with heat exchangers both of which are margin accretive. I'll pass it to Brad here.
spk14: Thanks Rich. Good morning everyone. Let's go to slide 6. Just a reminder that our presentation today is on a continuing operations basis excluding our divested environmental solutions group business from the historical results. Let's go to the charts. The top bridge shows our revenue growth. The impact of acquired businesses this year more than offset the disposition of the Staco which closed on March 31st by 21 million while FX was basically flat. From a geographic perspective the U.S., our largest market, was up 8 percent in the quarter on healthy broad-based demand. Europe and Asia were down 5 percent and 10 percent respectively. China which represents about half our revenue base in Asia was down 17 percent organically in the quarter primarily due to shipment timing within polymer processing. On the bottom chart bookings were up 90 million organically year over year on solid broad-based demand across most end markets. Below the line items were slightly unfavorable on a year over year basis in the quarter on higher corporate costs mostly related to acquisition deal costs. Our cash flow statement is on slide 7. Adjusting for taxes paid on the gain of the Staco which are non-operational in nature our free cash flow was 17 percent of revenue in the quarter up 48 million year over year. Year to date cash flow on this chart is 11 percent of revenue. The fourth quarter is historically our highest cash flow quarter as we expect more favorable working capital balances over the rest of the year. We are on track to deliver our full year adjusted free cash flow guidance of 13 to 15 percent of revenue unchanged from prior guidance. With that let me turn it back to Rich.
spk15: Thanks Brad I'm on slide 8. It was a busy quarter with the portfolio moves, discontinued ops and some counter cyclicality within the portfolio. As a result of that we thought it would be a good idea to lay the groundwork for 2025 earlier to provide some hopefully helpful views. Let's start with the portfolio. We articulated throughout the year that underlying demand across many of our end markets is solid and that remains the case as we look forward into 2025. With a diverse portfolio such as ours we enter each planning cycle constructing a view of the overall macro, the individual business cycles and our competitive position. In 2024 we had a familiar challenge much like we did in the post COVID period navigating the biopharma demand cycle. In 2024 we managed a down cycle in the portion of our high backlog long cycle portfolio as well as the regulatory and stocking idiosyncrasies in heat exchangers as shown on the right side of the page. As you can see on the slide we managed to offset the significant cycle headwind with mixing up our consolidated margin on broader short cycle improvement augmented by our growth platforms which we invested in both organically and inorganically. As we complete 2024 and begin forming our view for 2025 we do not receive the same counter cyclicality in the portfolio. Bookings and customer forecasts indicate that our growth platforms are in a multi period demand cycle. We are particularly pleased with the growth rates and biopharma components, thermal connectors, precision components and CO2 systems all with margin accretion attributes to the portfolio. We expect heat exchangers to return to growth in 2025 in the recovery and heat pumps and large format demand district heating and data center applications for which we are expanding production capacity today. Let's move to slide nine. Organic investment, inorganic growth and shareholder friendly capital return main front and center to our strategy and we have done all three so far in 2024. We have been more active on portfolio pruning this year at attractive valuations as we have robotically reshaped the portfolio to higher secular growth and less cyclical and market exposures. As mentioned earlier we will exit 24 with significant optionality for capital deployment and or capital return which is reflected on the balance sheet capacity bar on the right. Let's finish up with slide 10. I've already covered the adjusted EPS guidance to accommodate the discontinued operations earlier in the deck which is summarized on the left. At the time of the ESG announcement we are often asked about the assumptions needed to offset the lost earnings from divestiture in 2025. We prepared the bridge on the slide to provide some direction on the moving pieces on a pro forma basis. Let's not get too excited. We will as always provide formal 25 guidance after the close of the year but I thought it would, I thought but I hope that you find it to be a reasonable pro forma view that provides clarity on the moving parts. Left to right. We start with predisposal EPS from our previous guide. We treat retrospectively the disposals on a full year basis. We treat the cash balance prospectively as if it were held for the full year in the short term in highly liquid positions where it is presently which includes the retirement of paper costs in 2024 and we roll forward the 2024 acquisitions earnings benefit. We get to a rebase 2025 EPS of $8.60 to $8.75 on a base model that assumes zero organic growth in 2025. If we model a 3 to 5% organic growth at a 40% conversion rate next year which includes $25 million in restructuring roll forward that is already completed or underway this year we get an additional $0.55 to $0.90 of EPS. As I mentioned earlier we are accelerating our synergy capture for recent acquisitions including footprint consolidation so I would expect the restructuring contribution to be higher in 2025. Consider what is covered in the growth platform's growth trajectory, margin mix and long cycle Given the comparable performance that we discussed on slide 8 the top line and incremental margin assumptions seem reasonable. Now I certainly doubt that we will sit on that amount of liquidity unless there is a drastic negative change in the macro and then in that case it is nice to have an insurance policy. Clearly this model can be flexed for share repurchases in M&A but the model timing is problematic so this is a simplified view. Our preference is to be active on the M&A front and at present that environment is getting better. We have an interesting opportunity pipeline but rest assured we will proceed with the capital discipline that we have demonstrated in the past. With that let's go to Q&A and I won't say idiosyncrasies or whatever. Okay let's go.
spk09: Thank you. If you would like to ask a question simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question from the queue please press star and the number 2. We ask that participants limit themselves to one question and one follow-up question. Again that's star 1 to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Jeff Sprague, Vertical Research Partners.
spk05: Thanks, we're all tongue-tied this morning. Good morning Jeff. Good morning. It's early but it feels late. Just on the comment on climate sustainability Rich that you made as you were going through that at the opening comments, the comment about materially higher in 25, was that a total segment comment, a heat pump comment? Can you just maybe elaborate on the moving pieces within that segment in particular?
spk15: Yeah, I mean I think there was a bookings comment more than anything else. If you recall back last quarter we had said that we would hope to have seen bookings increase in a brace plate heat exchangers for European heat pumps. That was not the case. So we have taken down our full year estimates in that particular product line. So that's negative bookings now. We're going to take down production just to let whatever the remaining clearing event needs to take place between now and the end of the year. So we'll cut production in Q4 also in terms of the estimates. At that point I think it's fair to say that bookings based on what we see for forecasts for 25 demanding heat pumps should inflect positively going forward there. And in CO2 systems based on feedback that we're getting from the market in terms of spend, we would expect a material amount of bookings inflection there. Whether we get it all in Q4, whether it splits between Q4 and Q1, we'll see. But based on our market read there, we think that we're going to be materially up on CO2 systems in 2025.
spk05: And then I appreciate the bridge here. It's definitely helpful. Just thinking about that 50 cents, right, that's tied to sort of cash on hand. Obviously the deal impact can vary depending on what you have, what you pay for stuff in the light, right, multiples. Do you foresee a scenario where it's less than 50 cents because you're more active on the M&A front? How should we think about that?
spk15: Yeah, I mean, and I tried to cover that in the commentary, Jeff. Look, at the end of the day, someone described it, the in the bag would be just to sit on the liquidity and that liquidity, you can just basically say that deposit rates, even with factoring and rate cuts, would drive that kind of result. My comment is that I don't foresee that actually happening. Now, whether it's M&A or share repurchases, that math gets kind of funky, right, because you got to start. But we've done the models here and said, you know, if it's margin-accretive and we paid 15 times, what does that look like? And if you close it in the Q1, what does that look like? Or if we did our share repurchase of a billion, what does that look like? You can do those scenarios, but we just thought optically to give you a view of, you know, it's not only the, you know, it's not 2021 anymore where holding on to liquidity was a zero-sum game because your cost to carry was neutral if not negative. Now it's meaningful. And if you go back and look at our interest costs on commercial paper in 2024 and you add that back again, the gap that we have on the lost earnings is really what we're trying to show here is significantly reduced because of that carry. So I hope and I would expect that the interest income line is going to be overstated because I would expect us to deploy M&A capital. But just as a note, that cash balance is just the after-tax proceeds of the disposals and it doesn't really factor in our Q4 cash flow. So that number is a little bit understated anyway.
spk05: Right. And also you got additional leverage to deploy if you want to. Great. Appreciate it. Thanks. I'll leave it there.
spk15: Yep. Thanks.
spk09: And we'll take our next question from Julian Mitchell from Barclays.
spk11: Hi. Good morning. Maybe, you know, a lot of good color on the slides. Maybe one thing I wanted to touch on was just the overall organic growth backdrop. Your tone sounds pretty confident. I think bookings up -single-digit organic is sort of broadly what you expected. Just wondered sort of what your impression was of the broader environment in terms of customer activity, anything notable moving around. And tied to that, you know, when we look at your segments, say in Q3, very, very widespread of organic growth outcomes, you know, one division up, low, double digit, one down, high single digits. When we're thinking about the three to five percent framework you have on slide 10 for 2025, is the core assumption that the sort of variability across the five segments is much narrower and kind of all are contributing to growth?
spk15: Yeah, Julian, I think that's what we were trying to do with the slide eight. I mean, I think the 300 million headwind was like a four or five percent growth headwind that we carried into this year that we were able to offset by the kind of the investments in our growth exposures. So what we're saying is here we don't see any indication on the growth platforms for that growth rate. You know, this is the law of small numbers, of course, is that that will continue at the same pace, I guess, in terms of growth going forward. And then we'll begin to lap the headwind that we have a basically, which is a long cycle part, which is beverage can making, which is completely bottomed at this point. And polymer processing, which we believe is bottomed at Q4. What we're going to see in heat exchanges next year, I'd like another quarter to figure it out and see what everybody's going to say about heat exchanges. But what we can from our channel checks, we would expect that by cutting production in Q4, we'll probably undercut the end of the market and just push demand into next year. So, if I, you know, if if if I look at the core portfolio, I don't I don't see anything else that is in cycle down in twenty five. We're just getting that behind us. And that was a three to four to five percent or three to four to five percent headwind this year. So that's why I think it's reasonable to expect. I think what we modeled here was three to five and the incremental margin. If you if you if you take out the restructuring benefit is basically where we've always been at twenty five to thirty five.
spk11: That's very helpful. Thank you. And then just maybe, you know, one quick follow up on one of the segments. D. I. I. doesn't often get much attention, but, you know, superlative margin performance again in that business in Q3. You've seen that in the first half also. So maybe sort of clarify. And I know there's a mix commentary as a tailwind for .I.I., but is that something structural changing in the mix in terms of kind of how you've repositioned that business or it's simply just a consumable versus equipment dynamic. And that may flip around next year.
spk15: The consumables equipment will fluctuate quarter by quarter. But if you look at it and look at it over longer periods, it's not overly meaningful. So it does hear comments quarter to quarter about it. But over a twelve month cycle, it always ends up in the same spot. Really, the margin performance here is that the management team of that particular business has done a excellent job on cost to serve. This is a global business. There it's synergy extraction from the cost to serve on a global basis. So, I mean, that's the majority of if you go back and look over the last three to four years, it's not generally been volume. It's been business model change. So I don't think that these margins that we're posting now, because I know what the pipeline is for twenty five and twenty six. I think that this is a reasonable approximation where this business is capable of delivering.
spk11: Thanks very much.
spk09: Welcome. And we'll take our next question from Scott Davis from Mellis Research.
spk03: Hey, good morning, guys. Scott. Hey, I wanted to follow up a little bit on on the question. I think it was Jeff. It seems, you know, the deals we've seen the last couple of years that, you know, the multiple ranges, the only deals that are kind of working are the ones where there's a fair amount of synergies. Is that is that something when you guys look at your existing portfolio, is there is there a wide enough net there to be able to buy things that bolt on to make you kind of the what I'll say the, you know, the best owner of that asset? Or do you think or multiples come down to the level where that's no longer the case?
spk15: I think that if you go back and look at multiples paid here over the last four to five years, I think they've been reasonable. And at the time of the announcement on the kind of more material deals, there was always a good portion of the return that was based on synergy extraction. The smaller deals, there's really not a lot to do, but the bigger deals, you know, we've built basically an engine on our existing. You know, if you think about what we went through from 18 to about 22, we had built this engine to extract synergies of out of our own core portfolio, which driven, which drove a lot of margin expansion. Well, the benefit of building those engines, if you will, is when we do an M and a, we just do the same playbook just because we practice on ourselves for five years. So they need to be of a decent of enough size. But I think everything that we did of the bigger ones recently in clean energy had a good amount of synergy extraction. And if you go back and look at the transcript and you look on the clean energy side, I think that we posted a 20% margin this year. It's going to take us probably three quarters of 25 to finish up on the footprint and everything else. But we fully expect to drive those businesses up to 25 on synergy extraction
spk03: alone. OK, that's good color. Hey, guys, maybe a dumb question. But when you when you're selling these thermal connectors, who's speccing in the product? Is it the cloud guys or is it the cooling guys? Every and I guess in one aspect, and you're good to go on that design. Yeah, look,
spk15: I'll answer it this way. We've been in this business for quite a while, so it's not a product that that we're ramping up because of a I build out this product was actually built for super computing applications, which are the only ones that were using water cooling is relatively low volume in the past. So it is specced out and there are recommended specs, but you still need to sell to the user and or the builder. So it's it's kind of complicated, but we would, you know, we're the ones I think that we can claim to have the most product that's actually in use in the ecosystem today.
spk03: Right. But the point is, kind of once it's specced in, if it needs to be replaced, preventive maintenance or whatever, it's like for like. Right. I think that would be the the assumption. Yes. OK, OK. Fair enough. Thank you, guys. Good luck. Thanks. Thanks.
spk14: Thank you.
spk09: And we'll take our next question from Dan Dre, RBC. Thank you. Good morning, everyone.
spk15: Morning.
spk06: Hey, on the bio pharma, the recovery underway in the single use is what are the green shoots you're looking for? You know, we heard we saw results that would suggest that from Dan or her in particular. So is there anything broader going on in terms of how you think because it's been the most extended the stocking period for everyone, but just any color there would be helpful.
spk15: Sure. Look, we let down because we're because of the amount of inventory post covid that had been put into the channel and we're leading out. Right. Because these are consumable products. So these are don't require new builds of new systems. They just need the systems that have been sold in previous periods to continue to operate. So for a while, there was a little bit of delinkage because we were going down early. And from what our customers saying, I think that we've been reading the reports from from the market participants. And we're mostly in line now. I think we're all saying that basically the same thing in terms of the trajectory and the recovery. And I think that that is reflected in our growth rates in terms of the consumables portion of it.
spk06: Good. And now you'll have double the amount of imaging questions that you typically get. Your primary competitor made a lot of noise about broadening a platform, what they called from source to shelf. They're they're more vertically integrated than you guys. But is that a broader platform that you all would be interested in participating in? Do you have aspirations there? They paid up pretty sizably for a SaaS business.
spk15: Dean, are we talking about the acquisition that they just made?
spk06: Yes, but then and then.
spk15: Yeah, I mean, we've got we've got a good size track and trace platform within that business today. So I think it's nuanced in terms of where you are in the chain. We're more pharma oriented and I haven't studied it. That looks like it's more food oriented. So we've got a pretty big business right now that's actually been doing quite well over the last couple of years in that space. So we're already there.
spk02: Great. Thank you. And
spk09: we'll take our next question from Nigel Ko, Wolf Research.
spk08: Thanks. Good morning and thanks for the 25 kind of help out there. So sounds like you're pretty sort of like the base case would be the organic range you laid out there. So you'd encourage us to kind of use that range. But what I'm kind of curious of is when we look at the look at the 24 performance, what impact did you have from the capital businesses, you know, Mark, Belback and the Swep European businesses? If we assume that those are bottoming out this year, maybe statewide next year, what is the mechanical impact of those businesses?
spk15: Nigel, if you go to slide eight on the presentation, we give you the absolute number and it's now going to get it wrong. Three to five or five or five percent headwind that we're taking. And that is on a that is on a rolling 12 month basis. Correct. So it's a few more of last year through Q3 this year. It's cost us 300 million bucks of headwinds and that's about four or five percent growth.
spk08: OK, I completely missed that. So again, so if that then flattens out, your three to five seems, I don't know, no improvement in the rest of the businesses. Is that the right way to react?
spk15: Like I have, you may have missed the beginning here. I mean, we're not giving out 25 guidance. We just thought that it was important because of all the noise with discontinued ops and everything else to kind of let you rebase your look on 25. I didn't want to come out to this thing and say, well, here's discontinued ops and we'll tell you in January what that all means. So it's a reasonable approximate approximation. But give us another quarter to get an understanding of the macro and everything else. And I'm not saying that those are exactly going to be the numbers that we give out for 25 guidance, but they look reasonable based on using the growth rates that we have on our secular growth exposures. And then a lapping of the headwinds that we have seems reasonable. But I'll will rest assured we'll update them in January.
spk08: OK, that's a good boilerplate response, Rich. And then just on just a quick clarification on the four key guide and then I'll pass it on the four key. So, sorry, the the full year EPS, the so the I'm guessing about 10 cents of interest income coming through in the fourth quarter from the ESG divestment proceeds. So is that wrapped into the 102 or is that sort of within the five cents kind of bump up to the low end? Just as any help?
spk15: I don't know whether it's 10 cents. I'd have to go back and look deconstructed. There is an amount of interest income that's in in the bump that helps to offset what I mentioned earlier about, you know, we're taking heat exchanger volumes down or making some production cuts there. So, yeah, it's all in right now. And at the end of the day, we're driving towards the top of the range as usual.
spk08: Yeah. OK, thank you,
spk02: Rich. Thanks.
spk09: And we'll take our next question from Joe O'Day Wells Fargo.
spk10: Hi, good morning. Thanks for taking my question. Just wanted to touch on on fueling and the comments around below ground fueling, inflicting positively in any sort of context or perspective in terms of the cycle trends there and what you're seeing now in terms of how early on we are and seeing some growth.
spk15: Yeah, I mean, that's been a headwind for us for three years, I think, right, because it's suffered with inflationary inputs and the lack of ability of labor and a variety of things that if you had gone and looked at the CapEx projections for retail operators, it may never hit their numbers just because of the inflation was going to the system. So with labor costs and labor, just availability getting better, we've seen that begin to inflect positively, which is great because it's margin-accretive to that particular business. So when we would expect that to cycle forward from here on the demand side of it. It's been relatively muted, so you can't see it, but that is us. We are managing this business for margin, and I think we've made some tougher decisions about business that we would take, particularly in Europe and Asia. So that is muted the top line growth because we, you know, because in combination with the cryogenic components, if we get this right, we can get the entire segment up to 25% EBITDA margin at kind of an exit rate 25, or at least that's the goal.
spk10: I appreciate that. And then just wanted to circle back on the restructuring. I think you talked about as we head into next year, 25 million of carryover, but also made some comments that there could be more. And so just wanted to make sure I heard that correctly in terms of are there additional sort of planning efforts underway and where we could see more of that happening across the business? Yeah,
spk15: I think that the 25 is either completed or to be completed in fiscal year 24. So that's the roll forward of what we get done this year. But we've got a lot to go. Like I mentioned previously, I think that the synergy target that we had put in the cryogenic acquisitions was about 20-ish. Some of that requires footprint consolidation over time, which takes longer. So back to my comment about driving that segment to 25. We'll be incurring costs clearly through the first two to three quarters of next year, which will require some more restructuring costs, which will pick up in kind of the further roll forward. So that number that you see in the chart again is incurred or to be completed in fiscal year 24.
spk10: Understood. Thank you.
spk09: And we'll take our next question from Steve Tuesday, JP Morgan.
spk12: Hi, good morning. Hi, Steve. I'm going to ask an even dumber question than Scott. What is the actual revenue kind of guidance for this year? Like the absolute kind of rough number you're guiding to for this year?
spk15: Oh, I don't know. I think we gave you a range in the top line, right? A one to three.
spk12: Right. But off of like a little like a seven point six billion number, something like that comes out to.
spk15: I don't know. Off the top of my head. All right. Got me.
spk12: I'm kind of I'm kind of guess it's not guess it's not a dumb question.
spk15: I'm sure we can get it and you can follow up with Jack to give it to you, but I don't know what the exact baseline number that it comes off.
spk12: I think it's seven seven by my math. Just wanted to double check that. So how how big are the headwinds?
spk15: This is like questions about net interest income. Didn't your boss address that? Anyway, keep going.
spk12: Sorry, like like like total top line absolute sales. Kind of important, I think. Don't you think?
spk15: Well, I think that you'd be able to model that. But go ahead. Like,
spk12: don't people ask you like cocktail parties, like how big the company is you run and you know, you kind of throw it eight billion and stuff. I mean, like you should know that, right?
spk15: I'm not a cocktail party guy. But anyway, keep going.
spk12: The the headwind businesses, as we'll call them, how big or how big are those this year? Are those about like three billion in total?
spk15: No, no, no, no, no, no. No
spk12: billion. Something like that.
spk15: I'd have to do the math in my head. I mean, what are we talking on a 24 full year basis?
spk12: Yeah, yeah. I mean, just like like like what what what were like the 300 million was off of like what base like
spk15: a billion. I'm doing it in the back of my head. It's like a billion.
spk12: Yeah. Yeah. OK, got it. And and as far as like your outlook next year for pricing, is it a little more normal? Is it anywhere that you're seeing any kind of, you know, price pressure or is it, you know, kind of modestly positive or maybe even like a point or something like that for next year?
spk15: Modestly, modus, modus, more mix than anything else, but modestly positive on pricing. And to that end, we've been taking advantage of going long into 25 because input pricing on commodity metals is pretty favorable. So we've been going actually gone out into 25 to help that out.
spk12: OK, and then just one last one for you for the other businesses, kind of the mixed bag businesses outside of DIY, of course, are any of those in there that you're that are kind of like on watch for like declines next year? Any that any that worry you out of the other business, not the secular growth, not DIY and not the headwind businesses like the other business.
spk02: I had to cover in the commentary we knew about Belvaq. We knew
spk15: about Mog. We kind of knew but got it wrong on heat exchangers. There's not another business in the portfolio with that kind of quantum headwind as we look into 25. So the only kind of worry that we would have would be about the macro. And then we'll see.
spk12: Right. OK, that's all I got. Thanks a lot. Great.
spk09: And we'll take our next question from Joe Richie, Goldman Sachs.
spk13: Hey, good morning, guys. Tough, tough act to follow there. So I'm going to I'm going to I'm going to ask I'm going to ask you a question maybe slightly more positively. If I, you know, we're getting to hopefully election certainty sometime in the next month or so. Project financing is arguably hopefully getting better because of interest rates. You've had one of your competitors, you know, call out the fact that that's really impacted their car wash business. If you kind of think through like that that macro element, which is both election and interest rates like, you know, where where can you potentially see a benefit to your business? And how do you see that kind of playing out in 2025? And know that you don't have a crystal ball. So your best guess at this point?
spk15: Yeah, I mean, I think we would have hoped that interest rates would have had a bigger impact in the second half of twenty four on volume. But I think because of election uncertainty and a variety of other things, you can feel a little bit of caution out there. It's not bad, but it's not, you know, we the amount of the if we take a look at the amount of coding that we do project space business versus the time that it takes for those quotes to turn into actual orders. You can end this, you know, this notion of things being pushed that you hear a lot about. That's not that's not not a thing. Right. So to the extent that cost the capital is stays down and that we get some kind of certainty going into twenty five, I would expect, you know, if we take a look at some of our businesses that you could call kind of like more project related that we would
spk02: expect that to inflict positively.
spk13: Okay, fair enough. And then I, and then we talked a little bit about the recovery and bio pharma, which is, which is awesome to see. The next kind of logical question is like, when can we get the margins back up to that thirty plus range? And I know that you're feeling good about the recovery that business since it's twenty, twenty five. And so just kind of any thoughts around getting back to thirty percent next year?
spk15: Well, it was twenty nine in the quarter. And that's taking into account still, still taking into account that Maug is probably is bottoming now. And by the way, I do, you know, to Maug's credit, despite the top line headwind, their ability to preserve margins during that period was excellent. So, to me, it's more of what is going to be the growth rate in bio pharma and thermal and single use pumps. Everything and everything that we've got in that particular segment to the extent that it stays on the track that it is. It's all incremental margin positive to the twenty nine. We just posted.
spk13: Good to hear. Great. Thanks, guys.
spk02: Thanks.
spk09: And we'll take our next question from Andy Caplewitz from Citigroup.
spk01: Good morning, everyone.
spk15: Hi,
spk01: Rich. With the understanding that you aren't giving out twenty five guys, as you just said, you did say that you could do forty percent incrementals with some restructuring tailwind and mixed benefits. And as you know, you've talked about twenty five to thirty five percent long term incremental. So should we get more excited at this point that with accelerated portfolio transformation doors really making that transition to a higher incremental margin cable company? Is that a bit premature?
spk15: No, I don't think it's premature at all. At the end of the day. I mean, we loved the SG. But the fact of the matter is it was a high growth business that had decremental margins to the greater portfolio. And that's other than and market cyclicality and blah, blah, blah. It's part of the reason that we took the action that we took. So and if I don't want to keep repeating myself, but if you go back to slide eight, slide eight is what we talked about back at the last investor day. This is where we're investing organically and inorganically. And hopefully we should be doing that in businesses that have higher growth rates and higher margin profiles to them. I mean, you saw yourself in action when you went down to to DFR and conures. I mean, those that CO2 systems business is a high growth, high incremental margin to the segment business. So, you know, it's you know, we've got all the irons in the fire, whether it's portfolio construction or organic investment or inorganic investment. It's all part and parcel to driving the consolidated segment margin to twenty five. Right. And we're going to get there by hooker. Love
spk01: it. OK. And then just, you know, another question you love around bookings, just one clarification. Like, so the DCST really the heat exchanger stuff, the big difference in what you thought versus that book to bill of one. I know you mentioned macro is maybe still holding some projects back as you look at Q4. Do you see book to bill getting closer to one if the CST does begin to show some life on the heat exchanger side?
spk15: It depends on what the order intake is going to be in CO2 systems because we've basically taken bookings assumptions down for heat pumps. So what we had originally forecast for heat pumps is is worse going into Q4, which is accommodated into our forecast. Whether we can we know maybe I should be that definitive. We expect that that we will inflict materially higher in bookings on CO2 systems. It's just a question of whether we can get them from forecast into orders in Q4 or not.
spk01: Got it. But it's coming in the next couple of quarters. Just a question of when.
spk02: Yes.
spk01: Helpful. Thanks, Rich.
spk02: Thanks.
spk09: And our final question comes from Mike Holleran from Baird.
spk07: Hey, morning, everyone. So a couple of quick ones just on the comment of managing capacity utilization. And I don't think this is of the scale that you would have talked about fourth quarter last year. Is this just tied to the heat exchanger piece or is there anything broader and any comments on inventory levels in the channel?
spk15: Yeah, we, you know, overall, we'd like to maximize cash flow in Q4 and then depending on where you are in terms of backlog and the delivery assumptions of that backlog, if we believe we can push production performance in January out of or it's prudent to do so at the end of the day, right? Because it flexes up cash flow and then it then it preserves fixed cost absorption into next year. So we'll do that in select businesses in Q4. And that's why we're kind of happy about the results in Q3 because it buys us the room to do that. Because, you know, we don't want to be like trying to protect margin in Q4 by building inventory. Right. So it's not nearly what it was back in the beginning of the D stocking days where we consciously made a decision to do that across the wider portfolio. This is a more selective comment.
spk07: Makes sense. I'm not beating the dead horse here. Just want to make sure I understand the 25 percent margin comments for DCDF. That was applicable to the whole segment, not just the gas piece or something more insular.
spk02: The whole segment. All right.
spk07: Quite the jump. Thank you.
spk02: Appreciate it. Great. Thanks. Thank you.
spk09: Thank you. That concludes our question and answer period and Dover's third quarter 2024 earnings conference call. You may now disconnect your line at this time and have a wonderful day.
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