Ecolab Inc.

website at ecolab.com slash investor. 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 factor section in our most recent form 10-K and in our posted materials. We also refer you to 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.

Thank you, Andy, and welcome to everyone on the call. I'm happy to share my perspective before we jump into Q&A. But in summary, with 35% adjusted earnings growth in Q2 and 25% to 29% earnings growth expected for the full year, I feel very good about where we are and even more where we're going. Ecolab's very strong business momentum continued in the second quarter. Our team delivered for our customers and delivered for our shareholders. Organic sales growth remained in its previously forecast 4% to 5% range, as growth in our institutions and specialty segments normalized to a strong 7%, lapping last year's very strong 13%. Performance across the rest of our segments further improved. Our growth continues to be leveraged by exceptional organic operating income margin expansion. Margin increased by 360 basis points to 17%, which is a record second quarter margin for Ecolab, resulting in the very strong 35% growth in adjusted earnings per share. With continued top-line momentum and operating margins expanding towards our 20% target, we remain firmly on our long-term 12 to 15 earnings growth trajectory. Looking at our segments, institutional and specialty continued to perform exceptionally well, delivering strong organic sales growth on top of last year's double-digit gains. Importantly, our business continues to significantly outperform softer restaurant food traffic trends as our customers look to Ecolab's labor savings technologies to improve their operational performance. This growth was leveraged by continued robust operating income margin expansion, with institutional and specialty's margin already exceeding 20%. Growth in our industrial segment improved, despite continued volatile end market demand. Water sales growth accelerated to 4%, led by strong growth in downstream and double-digit growth in our global high-tech business, which serves the rapidly expanding data center and micro-electronic industries. As expected, sales in food and beverage were stable, as good new business wins offset comparisons to last year's double-digit growth. Performance in paper improved also. a trend we expect to continue as new business wins, helps us accelerate as end markets stabilize. Our healthcare and life sciences segment also showed better performance. Life sciences growth improved to 4% as attractive share gains allowed us to outperform ongoing short-term soft industry trends. We continue to expect modest growth in our life sciences business during the second half of the year. healthcare sales went down modestly as we continue to exceed low margin business to improve our profitability our healthcare transformation is progressing very well and the previously announced sale of our global surgical solutions business to medline is moving exactly as expected subject to customary regulatory and closing conditions we expect to close this transaction very soon as discussed when we announced the sale Last quarter, once closed, the transaction will reduce our healthcare and life sciences quarterly sales by about $100 million and quarterly operating income by about $15 million. Longer term, SK continues to sharpen its focus on its very healthy anchor instrument reprocessing business that combines consumables, personal service, and digital solutions. Well, in other words, a typical Ecolab business. Well, there is much more to be done. I'm proud of the progress we've made to create a sustainable, profitable healthcare business that will deliver even stronger value for our important hospital customers. Pest elimination, once again, continued to execute exceptionally well. Organic sales grew 9% and organic operating income grew double digit, benefiting from our enterprise cross-selling strategy and innovative digital capabilities. As we continue our long-term growth journey, I'm excited to share details of our One Ecolab initiative, which will help fuel 5% to 7% long-term organic sales growth and continue to expand our operating margins towards 20% and beyond. We know what best-in-class performance looks like. The best restaurants, the best hotels, or the best data centers. And we know how to deliver this for our customers because of our experience serving millions of locations in more than 170 countries across 40 industries. By leveraging more than 100,000 system connections and billions of proprietary data points on business outcomes, operational performance, and environmental impact, we can demonstrate how an entire network of customer sites can operate at best-in-class performance to deliver even more customer value. This will help us drive attractive growth by continuing to capture more share of our existing 55 billion cross-sell opportunities. At the same time, These new technologies will allow us to enhance the way we operate and serve our customers by realigning the functional work done across hundreds of offices around the world into major global centers of excellence. The resulting total annualized savings of approximately 140 million are expected to be realized by 2027. Put simply, OneEcolab will enable customers to reach best-in-class performance on all three fronts, business outcomes, operational performance, and environmental impact by leveraging Ecolab's complete offering. Looking to the balance of 24, the confidence we have in our performance continues to strengthen. As a result, we are increasing our outlook for full year 2024 adjusted DPS to the range of 650 to 670, up 25% to 29% versus last year. As previously discussed, this range includes an unfavorable impact in the second half of 2024 from the sale of our global surgical solutions business. The unfavorable impact to 2024 adjusted EPS is now estimated to be $0.08 a share, which is a bit more than we had previously anticipated as we expect this transaction to close very soon. This is very good news, but it also has a bigger impact on the full year. FX, on the other hand, has also become more of a headwind and is now anticipated to be about $0.09 drag to full-year EPS. And despite these incremental headwinds to EPS, we still have increased our guidance range, which demonstrates the strong underlying momentum we have in the business. We expect to keep growing our organic sales at a similar rate as in the first half of the year, driving 2% to 3% value pricing and 1% to 2% volume growth. Attractive operating income margin expansion is expected to continue the second half of 24, so the rate of exceptional expansion will moderate the benefits from lowered delivered product costs will continue to ease. Finally, we continue to anticipate quarterly adjusted diluted earnings per share growth to progressively normalize towards Ecolab's long-term 12% to 15% target as solid growth continues and impact from delivered product costs expected to normalize exiting 24. As always, we'll remain good stewards of capital by continuing to invest in the business, increasing our dividend, and returning cash to shareholders. With great business momentum and cash flows, our balance sheet is in a very strong position. This provides us with many options to allocate capital to growth opportunities that will generate continued strong returns for shareholders. Ecolab's future has never looked brighter. Our leading customer value proposition, where our technologies help customers improve their operating performance, while reducing the water and energy use is increasingly relevant and continues to fuel our growth, pricing, and margin expansion. We therefore remain confident in delivering superior performance for our customers and shareholders in 2024 and beyond. So thank you for your continued support and investment in Ecolab. I look forward to your questions. Andy?

Thanks, Christophe. That concludes our formal remarks. Operator, would you please begin the question and answer period?